Statement of William F. Tyndall
Vice President, Environmental Services, Cinergy Corp.
Before the Committee on Environment and Public Works
United States Senate
October 6, 1998

Mr. Chairman and members of the Committee, my name is William F. Tyndall. I am Vice President of Environmental Services for Cinergy Corp. I am pleased to be here today to present testimony on behalf of Cinergy on a subject that this company probably knows too much about - acid rain legislation and sulfur dioxide (SO2) controls. As of one of the very first utilities to embrace the concept of strict SO2 controls as part of the 1990 Clean Air Act Amendments - which this committee was instrumental in getting enacted - Cinergy is in a unique position to comment on S. 1097. To summarize our views, while we are committed to addressing the environmental consequences of our generating stations, we believe it is premature to adopt any new reduction programs until the existing Acid Rain provisions of the Clean Air Act Amendments of 1990 and the new regulatory requirements spawned by EPA's recent decisions on the National Ambient Air Quality Standards (NAAQS) and the rule relating to transport of nitrogen oxides (NOx) are given a chance to work.

Cinergy Corp. and its operating utility subsidiaries (Cinergy) own and operate fossil fired and hydroelectric generating facilities in Indiana, Kentucky and Ohio. Cinergy was created in 1994 through the merger of The Cincinnati Gas & Electric Company and PSI Energy, Inc. The Cinergy companies serve over 1.4 million customers with natural gas, electricity, or both in those three states.

The Power of Coal

Cinergy is one of the nation's largest coal-burning utilities. There are those in the environmental community and in government that see coal as a four letter word. They would have us abandon this valuable natural and economic resource. Coal is an important fuel source for electric generation, accounting for 57% of all power produced in the United States. Coal will continue to be a large part of our national energy strategy. Cinergy knows that coal can be used in an environmentally responsible fashion. In its operations, Cinergy accepts this obligation for ensuring protection of the environment. However, by endorsing the 1990 Clean Air Act Amendments, PSI Energy, Inc., a Cinergy subsidiary, helped signal a then new way of thinking - that command-and-control environmentalism was doomed to a future of market-based solutions that actually provide incentives for companies to reduce their emissions.

Cinergy's View

Cinergy remains committed to promoting cost-effective and innovative ways to attain cleaner air. This is particularly important as the industry moves toward competitive marketplaces that will add even more pressure to keep customer costs as low as possible. Cinergy believes it is paramount that industry, government, the environmental community and other parties work together to find common sense solutions to environmental concerns. We believe that success in business and environmental excellence can and must go hand in hand. As an example of its commitment to the environment, on the first day of business as a merged company, Cinergy's Board of Directors adopted an Environmental Pledge to govern corporate actions.

Cinergy Steps Forward

In September 1997, Cinergy was the first Midwestern utility to voluntarily commit to additional reductions of nitrogen oxides (NOx) to support attainment of the existing clean air standards and to address the issue of NOx transport. At that time we also stated our support for market based solutions and for emissions trading. We also announced a voluntary demonstration project for the first application of Selective Non-Catalytic Reduction technology (SNCR) on Midwestern fuel at our Miami Fort Station near Cincinnati, Ohio. We realized that future emissions reductions were going to heavily depend upon technologies that were new and largely unproven on boilers of the size and configuration that we operate, or that use our fuel types. This demonstration began in June of this year and has so far been successful in reducing NOx emissions by 30%.

The Clean Air Act Is Working

There has been tremendous success in cleaning the nation's air. The work accomplished under the original Clean Air Act and its subsequent amendments has been a major contribution to this improvement. Lest we forget how far we have come in this effort, consider the following facts as presented in EPA's "Summary of National Emissions Trends, 1900-1996"\1\:

-- Total SO2 emissions for 1995 and 1996 were lower than in 1940 (18,552,000 and 19,113,000 vs.19,952,000 tons respectively)

-- Total VOC emissions for 1995 and 1996 were less than in 1950 (20,586,000 and 19,086,000 vs. 20,936,000 tons respectively)

-- Total NOx emissions for 1995 and 1996 were less than in 1980 (23,935,000 and 23,393,000 vs. 24,875,000 tons respectively)

In addition, I am pleased to confirm that the Greater Cincinnati Area, Cinergy's headquarters city, has met the requirements to apply for re-designation to attainment status for ozone. This success has come through cooperation between industry, government, and the people of our area. It is Cinergy's request that the Senate continue to encourage the EPA, industry and all other parties to work cooperatively and in the spirit of compromise to address pollution concerns and solve these concerns in a cost effective fashion. In this way, environmental benefits do not have to come at the expense of the economy.

This is not to say that everything is done. As the committee considers S. 1097, it is necessary to keep in mind not only where environmental programs have been, but also where they are going. We know we will get large additional reductions from utilities beginning in the next few years. Many of these programs post-date the introduction of S. 1097. Still other provisions are premature because the benefits of these further reductions are not yet realized. It is imperative that Congress understand the full impacts of all these adopted and pending measures before it legislates further.

In my remaining remarks, I will describe several of the current regulatory programs that have been, or soon will be, enacted that greatly impact utility operations. Congress established the Acid Rain Program in Title IV of the Clean Air Act Amendments (CAAA) of 1990. Its goal was to reduce acidification of lakes and streams, damage to trees, structural and architectural materials, and improve visibility by reducing SO2 and NOx emissions. The amendments placed a cap on SO2 emissions at a level 10 million tons per year below 1980 levels. In addition, NOx emissions were to be reduced 2 million tons below 1980 levels\2\. This program has already produced substantial reductions in SO2 and NOx. In the first year alone, SO2 emissions fell by about 5.6 million tons. NOx emissions are expected to fall 400,000 tons per year by 1999. In the year 2000, the second phase of the Title IV program takes effect, and an additional 4.6 million tons of SO2 reductions and 1.6 million tons of NOx reductions will occur.\3\

Sulfur Dioxide

Since 1990, Cinergy has reduced its emissions of SO2 per kWh of electricity by 42% and emissions of NOx per kWh by 27%. Cinergy further projects that it will further reduce its emissions per kWh by a total of 50% for SO2 and 34% for NOx when the second phase of Title IV takes effect in the year 2000. To achieve these results, Cinergy has made and will continue to make significant expenditures to reduce these acid rain precursors.\4\

-- Title IV NOx Phase I & II capital expenditures of about $100 million

-- Title IV SO2 Phase I capital expenditures of about $333 million

-- Title IV additional O&M SO2 expenditures of about $90 million for 1995 and 1996 including allowance purchases.

In addition during the construction of the W. H. Zimmer Station, Cinergy and its partners spent $350 million for environmental control equipment including precipitators, scrubbers, and low NOx burners. This station began commercial operation in 1991 and was recognized by EPA Region V for excellence in SO2 control.

SO2 emissions in the United States are the lowest in over 50 years as a result of these existing programs. Nationally, NOx emissions have remained fairly constant between 1980 and 1996, even with the tremendous increase in vehicular traffic, fuel combustion and other source activity. The second phase of SO2 and NOx reductions under Title IV will begin in a little over one year. Additional near term reductions are expected with the new NOx SIP Call, the new NAAQS for PM-2.5, and potentially under the proposed rules for Regional Haze. It will take time for the full effect of these new efforts to be fully seen in the environment.

However, the environment is already seeing the benefits of these reductions. The first year's reductions made under Phase One of the CAAA's Title IV alone produced measurable differences in acid deposition. The U.S. Geological Survey found that when 1995 data was compared with that of 1983 through 1994, there was a 10% to 25% drop in wet deposition of sulfate concentration and acidity particularly at some sites in the Midwest, the Northeast, and Mid-Atlantic Regions. In addition, SO2 concentrations have fallen 37% between 1986 and 1995 at ambient monitoring sites.\5\

NOx SIP Call

EPA has recently finalized its NOx SIP Call rule. This rule establishes limits on summer NOx emissions, and places a cap on utility NOx emissions during the summer ozone season in 22 eastern states and the District of Columbia. This utility cap is based on an extremely low mass emissions rate of 0.15 lb NOx/mmBtu of heat input. Overall, the rule is expected to reduce NOx emissions during the ozone season in all sectors from 4.2 million tons to 3 million tons per season, or a decrease of 28%. Utility NOx will fall from 1.5 million to 0.5 million tons per season for a 64% decrease. The estimated capital cost to utilities in the 22 state region is over $14 billion. Cinergy estimates its potential capital cost between now and 2003 to be between $500 and $600 million. Clearly utilities are bearing the brunt of these reductions.

The rule requires the affected jurisdictions to modify their State Implementation Plans (SIPs) to incorporate the requirements of this rule and submit the revised plans by September 30, 1999. Many of the requirements of S. 1097 are contained in the final NOx SIP Call. These provisions include, but are not limited to:

-- A NOx allowance program for the 22 states and District of Columbia affected by the rule

-- State by state NOx allowance allocations, and a suggested an allowance distribution scheme within the states

-- An allowance banking and tracking system and a NOx allowance transfer system(model trading rule) for the states to adopt at their discretion

-- A recommendation for states to establish "new source set-asides" for new sources

-- A proposed Federal Implementation Plan (PIP) in the event a state fails to submit an acceptable plan containing the requirements established in the SIP Rule

NOx and volatile organic compounds (VOCs) are the two precursors that form ground level ozone. The most effective approach to resolving ozone concerns is a mixture of NOx and VOC controls. The appropriate mix of these controls varies by region. In the Greater Cincinnati area for example, it has been shown that VOC controls are more effective for attaining the existing 1 hour ozone standard. The Ozone Transport Assessment Group (OTAG) showed that the impacts of air pollutants carried by air currents decrease exponentially with distance from the source of release. In addition, power plants currently produce only 29% of all NOx emissions. The transportation sector produces 49%, with the balance of 22% being produced by all other industrial and fuel combustion sources. In addition, power plants produce negligible amounts of VOCs. Individual conditions are very site specific. Therefore Cinergy believes that a local and sub-regional approach to controlling ground level ozone is most effective, as opposed to the one size fits all approach embodied in the NOx SIP Call.

Last summer, EPA revised the NAAQS for ozone, created the new PM-2.5 health standard, and proposed regional haze regulations. In doing so, it set in motion a process that will likely result in further reductions in many pollutant precursors, including SO2 and NOx beyond those called for by Title IV and the NOx SIP Rule. Scientific research has shown that small aerosol particles generated from a wide variety of sources are significant contributors to both visibility impairment and the level of fine particulates in our air. An important portion of these particles is believed to be caused by emissions of SO2 and NOx. Fine particulate emissions come not only from utilities but other industries and the transportation sources as well. In fact, many of these are in close proximity to urban areas. Ongoing research and monitoring efforts are designed to quantify the magnitude and source of these emissions. These particulate reductions will not only result in additional health benefits, but also will reduce acid deposition.

I should point out that as a result of the Senator Inhofe's Amendment to the transportation bill enacted last spring, Congress established a schedule for implementing the new PM-2.5 standard. Senator Inhofe's Amendment was based on the consensus view that there should be no implementation of the new standard until the necessary monitoring data was collected regarding the amount and composition of the fine particulate matter in the air. Without this data, States can not make informed decisions regarding the amount or location of emissions reductions needed to meet the new PM-2.5 standard.

In Conference, the Conferees extended the implementation schedule to include EPA's proposed regional haze program. In effect, Congress realized that the compounds blamed for regional haze - such as sulfur dioxide - are also the pollutants of concern for the fine particulate matter problem. Moving ahead on regional haze without the fine particulate matter monitoring program would clearly be imprudent.

The same logic should apply to S. 1097. The new fine particulate matter standard, the regional haze program and the acid rain program all target sulfur dioxide. It makes no sense to implement them on separate time tables. It also makes no sense to force States to make arbitrary and untargeted cuts without the technical information that everyone - including EPA - agrees the States should have to make effective reduction strategies. It also allows individual or groups of States to balance technical and economic criteria and maintain state primacy of their duties without federal preemption. In short, the SO2 program as envisioned by this bill would conflict with Senator Inhofe's Amendment as ultimately included in the highway legislation.

Mercury

Late last year, EPA released the "Mercury Study Report to Congress". This report was required by section 112(n)(1)(B) of the 1990 CAAA. It is the most comprehensive study of mercury in the environment to date. While EPA pointed out areas where they think additional data is needed, and they did reach several important conclusions. EPA estimates U.S. anthropogenic mercury emissions from all sources to be about 187 tons per year. This estimate mirrors that of the Electric Power Research Institute. Utilities comprise only about one third of total emissions. In addition, total global emissions of mercury from all sources are estimated to be 5,500 tons per year, making U.S. sources only about 3% of the world's total. Because of the global nature of mercury transport, it is not clear that reductions in domestic mercury emissions will produce demonstrable reductions in exposure.

Despite the close agreement in the estimates of mercury emissions, EPA has since announced a Mercury Information Collection Request (ICR) that currently proposes to require utilities to provide specific data on coal characteristics from each generating station. Cinergy anticipates that this ICR will not appreciably improve the currently available data. EPA is also considering lowering the threshold reporting limits for mercury under the Toxic Release Inventory program.\7\

In the same report, EPA describes its review of available control methods for mercury. EPA states, "Although a number of mercury control technologies are being evaluated for utility boilers, most are still in the research stages, making it cliff cult to predict final cost effectiveness as well as the time to scale-up and commercialize the technologies. Because the chemical species of mercury emitted from boilers varies from plant to plant, there is no single technology that removes all forms of mercury." The report goes on to state that although estimates have wide variability and costs will be in the billions of dollars per year, more research is needed before technologies can be applied.\8\

EPA concludes that the average citizen is not at risk from mercury exposure. Only a small subset of the population is potentially impacted. The latest research indicates that the reference dose EPA uses to access risk is perhaps a factor of five too high. EPA's reference dose is based on short term, but high intensity exposures associated with a mercury poisoning incident in Iraq. Several studies from the Seychelle Islands and other locations which focus on low level exposures from fish consumption indicate that EPA's current reference dose is too conservative, even considering an appropriate safety factor.\9\ For this reason there is disagreement between different Federal agencies such as the Food and Drug Administration and the Agency for Toxic Substances and Disease Registry as to what this limit should be. The White House Office of Science and Technology Policy will launch an effort to resolve this conflict starting with a workshop next month. We encourage the EPA to work to resolve these differences by adopting a reference dose that considers the new scientific data and is also in line with that of the FDA and ATSDR, so that an appropriate exposure standard that is protective of public health can be agreed upon. Therefore there should be no regulatory action on mercury emissions until the Federal Government sets final exposure limits.

Conclusion

In summary, I would like to repeat that our country is benefiting from tremendous improvements in our air quality. This has come from the hard work of industry, government, the environmental community and other stakeholders.We know the implementation of the Clean Air Act to date has already brought additional emission reductions in SO2, NOx, and particulate matter. The benefits of these reductions are already being seen in the environment. Because of current initiatives under the existing law and ongoing regulatory actions, Cinergy sees no reason for Congress to pursue additional emission reductions at this time. As a proponent of competition in electric markets, Cinergy believes that many technological advances will be made in the coming years to make producing electricity even cleaner and more efficient.. The arbitrary addition of costly pollution control equipment at this time could actually impede such technological innovation by utilities and others. Once the implementation of the various pending environmental laws and regulations is complete, Congress should fully evaluate their effectiveness before imposing additional requirements.

I would like to thank this distinguished committee for the opportunity to appear before you.

\1\ Summary of National Emissions Trends, 1900-1996,

\2\ Source www.epa.gov/acidrain/noxts3.html

\3\ Source www.epa.gov/acidrain/overview.html

\4\ Cinergy internal estimates

\5\ EPA Brochure on National Air Quality: Status and Trends, 1996

\6\ The Chesapeake Bay and the Control of NOx Emissions: A Policy Analysis, August 1998, Discussion Paper 98-46, Resources for the Future, Alan Krupnick

\7\ Mercury Study Report To Congress Volume I: Executive Summary, December 1997

\8\ Mercury Study Report To Congress Volume I: Executive Summary, December 1997

\9 Effects of Prenatal and Postnatal Methylmercury Exposure From Fish Consumption on Neurodevelopment, Davidson, Philip W., et al. Journal of the American Medical Associaton, August 26, 1998, pg. 701

\10\ National Acid Precipitation Assessment Program Biennial Report to Congress: An integrated Assessment, National Science and Technology Council, Committee on environment and Natural Resources, May 1998, pages 23-24.