The Hearing will come to order. Good Afternoon.
This hearing is the first of several that we intend to have during this Congress on reforms to the Clean Air Act. This is an issue that is critically important to me and to my home state of Ohio, a major manufacturing state. For several years now, this Committee has been grappling with the complex issue of how to clean our air by reducing emissions without putting our economy in a stranglehold. Today, we are here to discuss the Clear Skies Act (S. 485), which is a proposal sent to us by President Bush to reduce power plant emissions and protect our economy.
As we hear testimony on Clear Skies from our three distinguished panels today, I think we need to keep in mind the important context in which we consider this legislation. It is no secret that our economy is struggling. One of the key reasons our economy is sputtering is that we don’t have an energy policy. As I have often stated, we sorely need to develop a long overdue energy policy for our Nation. As a member of the Energy Task Force, I will do everything I can to work for passage of an energy bill that harmonizes the needs of our economy and our environment this year. These are not competing needs. A sustainable environment is critical to a strong economy, and a sustainable economy is critical to providing the funding necessary to improve our environment.
We need a policy that broadens our base of energy resources to create stability, guarantee reasonable prices, and protect America's security. It has to be a policy that will keep energy affordable. Finally, it has to be a policy that won't cripple the engines of commerce that fund the research that will yield future environmental protection technologies.
Right now, about 86% of the electricity generated in Ohio comes from coal-fired facilities. For generations, the use of coal for electricity generation has not only provided affordable and reliable electricity for Ohio manufacturers, it has helped to keep the costs of natural gas down as well. This combination of affordable electricity and low-cost natural gas is absolutely critical to the health of Ohio’s manufacturing base, and our Nation’s manufacturing base.
The absence of a comprehensive national policy that harmonizes energy production and environmental protection has led to an unfortunate (and predictable) situation in which the rules and regulations intended to protect our environment are threatening to undermine our economy while failing to achieve significant environmental goals.
The Clean Air Act, enacted in 1970 to protect and enhance the quality of the nation’s air resources, has been extremely successful in reducing emissions of pollutants. As these charts show - Since 1970, emissions of all criteria pollutants have been reduced by 29 percent – despite the fact that energy use is up 42 percent [CHART 1], electricity use has grown 159 percent and Gross Domestic Product has grown 158 percent [CHART 2]. However, the current approach to regulation utilized by the EPA is plagued with burdensome and overlapping regulations that are subject to costly and time-consuming litigation and have become unnecessarily costly.
There are now more than a dozen separate regulations on the books for sulfur dioxide (SO2) and nitrogen oxide (NOx) alone – with additional regulations around the corner. As this chart illustrates, the regulatory process at EPA is long, complex and costly [CHART 3]. Further, litigation over several of these regulations has already delayed their implementation, forestalling the air quality benefits that they were designed to achieve. This patchwork of existing and soon-to-be-implemented regulations, coupled with the delays bred by continuous litigation over them, has created enormous uncertainty for utilities, co-ops, and municipal generators. This uncertainty has curtailed investments in technology that would reduce emissions at existing plants, prevented numerous new facilities from coming online, and caused several utilities to try to phase-out coal-based generation altogether by fuel switching.
Fuel switching – changing from coal-based generation to natural gas-based generation – is a tremendous threat to the economy of not just Ohio, but to the Nation as well. There are currently over 5,000 power plants in the United States that generate over 850,000 megawatt hours of electricity annually. In 2002, 19% of our electricity was generated by natural gas – as opposed to 50% generated by coal [CHART 4]. Reliance on natural gas for even this much generation has put a tremendous strain on natural gas supplies and pushed prices on available gas to record high prices.
The President’s National Energy Policy Task Force projected that over 1,300 new power plants will need to be built to satisfy America’s energy needs over the next 20 years. Because of the emissions limits and regulatory uncertainty triggered by the Clean Air Act, the Department of Energy currently predicts that over 90% of these new plants will be powered by natural gas. Further, analysis by EIA and the EPA shows that a large percentage of coal-fired plants are likely to be replaced by natural gas-fired plants in the near future.
We do not have enough natural gas to power all of these new facilities, and we do not have the capability to increase our supply to meet this demand [CHART 5]. Unless Congress develops a plan to deal with this situation, we are looking at major natural gas shortages, spikes in natural gas prices, and spikes in electricity prices.
Shortages in natural gas supply – and the resultant increase in natural gas prices – do not just affect utilities. Many other industries rely on natural gas – such as the Farming Community, the Steel and Metal Industries, Chemical and Polymers Manufacturers and Food Processing Industry [CHART 6]. It is not difficult to understand why a major shortage of natural gas – coupled with skyrocketing prices for natural gas and electricity – will ensure that many of our companies will no longer be able to remain competitive in the global marketplace. I recently met with a group of Manufacturers in my hometown of Cleveland. I was shocked when two of them told me that they were seriously considering moving their operations overseas because of high energy prices.
Although high electricity prices would severely affect businesses and their ability to compete in the global marketplace, it will have an even more profound impact on low-income families and the elderly. Everyday, many Americans are forced to make choices between paying for electricity or food and other essentials such as medicine when energy prices are high. This chart, based on Department of Energy statistics shows that low-income families pay a disproportionate share of their income on energy – which prevents that money from being used for other necessities [CHART 7]. The Center for Disease Control (CDC) states that more of our elderly and children die from heat exposure (8,015 between 1979 and 1999) than from all other natural disasters combined. The CDC also claims that air conditioning is the number one preventative factor against heat exposure.
For several years now, I have been trying to work on a bipartisan basis to head off this oncoming train wreck. During the last Congress, I held several hearings on the need to harmonize our environmental and energy policies that highlighted the need to promote energy development and environmental protection. I worked with Senators Bingaman and (Frank) Murkowski on comprehensive energy legislation, and with Senator Jeffords and Senator Carper to try to find a bipartisan compromise on Clean Air Act reform. Unfortunately, we were not able to enact comprehensive energy legislation or reach a bipartisan Clean Air agreement, and we are no closer to solving these very real problems.
In order to defuse the time bomb of skyrocketing natural gas and electricity prices that is sitting in our lap, Congress must enact a comprehensive energy policy that will increase our development of natural gas supplies and ensure that we have a diverse fuel mix for electricity generation that includes nuclear, renewables, natural gas and coal. To get there, the Senate must pass both comprehensive energy legislation that promotes domestic natural gas development and multi-pollutant legislation that will streamline the regulatory process, maintain the diversity of our fuel mix and achieve greater emissions cuts to protect our environment.
While the task of passing comprehensive energy legislation is underway over in the Energy Committee – and I commend Chairman Domenci for the work he doing on the bill - the task of passing multi-pollutant legislation falls on us here in this Committee.
Earlier this year, in order to move multi-pollutant legislation that will protect both our environment and our economy through the Committee, Chairman Inhofe and I introduced the Clear Skies Act (S. 485) by request. This bill - which calls for 70% reductions in SO2, NOx, and Mercury - will deliver far-reaching benefits and maintain energy diversity by expanding and strengthening a proven mandatory, market-based approach to reducing emissions.
The Clear Skies Act will improve the Clean Air Act by providing greater certainty that emissions are reduced while providing a stable regulatory environment that allows utilities to install necessary pollution controls without the fear that those controls will be obsolete before they are paid-for. It will result in cleaner air, less regulation and litigation, and lower energy costs to manufacturers and American consumers. Simply put, this legislation will provide tremendous benefits to the environment and is crucial to the long-term survival of our economy and our manufacturing base.
Specifically, the Clear Skies Act would establish federally enforceable emissions limits for SO2, NOx and Mercury. For SO2, Clear Skies sets a Phase I cap of 4.5 million tons in 2010 and a Phase II cap of 3 million tons in 2018 – down from 11.2 million tons in 2000. For NOx, Clear Skies sets a Phase I cap of 2.1 million tons in 2008 and a Phase II cap of 1.7 million tons in 2018 – down from 5.1 million tons in 2000. For Mercury, Clear Skies sets a Phase I cap of 26 tons in 2010 and Phase II cap of 15 tons in 2018 – down from 48 tons in 2000. These reductions are a not only robust – a 73% reduction for SO2, a 67% reduction for NOx, and a 69% reduction for Mercury, they would constitute the largest Clean Air Act emission reduction targets ever requested by a President.
The emissions cap and trading program in Clear Skies is based on the proven success of the acid rain program contained in Title IV of the Clean Air Act - which to date has been the most effective clean air program, having reduced SO2 emissions by 37% through 2000 while saving hundreds of millions of dollars in compliance costs. The Clear Skies program will provide power plants with the flexibility to choose among various options for reducing emissions that best fits their specific circumstances while saving over $1 billion annually in compliance costs.
Clear Skies also contains several provisions that reform existing Clean Air Act programs to streamline the regulatory process and help reduce the existing patchwork of regulations and rules.
The flexibility of the Clear Skies’ market-based cap and trade program and the certainty of its emissions reduction targets - combined with these reforms - will ensure that the real reductions called for in this bill can be achieved without forcing utilities to fuel switch and without forcing electricity and natural gas prices through the roof. Perhaps most importantly, Clear Skies will help ensure that the least of our brothers and sisters will not be forced to forego heating their homes - and that our companies will not be forced to move overseas to remain competitive in the global market – due to sky-high electricity and natural gas prices.
As I mentioned at the beginning of my remarks, this is the first of several hearings that we intend to hold in this Subcommittee on Clear Skies. It is my intention to mark-up Clear Skies at the Subcommittee level as quickly as possible and I will push hard to have the full Committee report a bill to the floor - and to have the Senate pass it – this Congress.
I want to thank our first witness this afternoon, Administrator Whitman, for coming to present President Bush’s proposal to the Subcommittee. It is always a pleasure to have the Administrator testify before us – especially on a topic as important as this one.
I look forward – also – to the testimony of our other witnesses and to working with the members of this Subcommittee as we move forward on this vital legislation.