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Statement of Joan Claybrook,
President, Public Citizen,
On the Office of Management and Budget
2001 Report to Congress on the Costs and Benefits of Regulations
and Unfunded Mandates on State, Local and Tribal Entities

United States House of Representatives
Committee on Government Reform
Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs
Washington, D.C.
March 12, 2002

****** EXCERPT ******

New Source Review Rules

The Clean Air Act, enacted in 1970, contains a grandfather clause that exempts hundreds of the nation’s oldest and dirtiest power plants, oil refineries and chemical and manufacturing plants from complying with current pollution clean-up rules.¹ Specifically, New Source Review (NSR) provisions require new facilities to install pollution control equipment when they are built, and require old facilities to install state of the art pollution reducing equipment when they expand their operations in a manner that increases pollution emission significantly.² The purpose of the NSR program is to "protect public health and welfare, as well as national parks and wilderness areas."³

According to EPA estimates, over the period from 1997 to 1999, the NSR program has reduced emissions by over 4 million tons.⁴ The unhealthful effects of these emissions are breathtaking. EPA estimates the annual health bill from 7 million tons of SO2 and NO2 at "more than 10,800 premature deaths, at least 5,400 incidents of chronic bronchitis, more than 5,100 hospital emergency visits and over 1.5 million lost work days."⁵ Another study by Abt Associates, a private research group that does work for the EPA, found that 31,000 deaths a year are caused nationwide by power plant emissions.⁶ Add to this human toll the irreparable damage to our national parks, watersheds, wildlife and natural resources, and it is clear that rigorous enforcement of NSR is essential to our national health and well-being.

In 1999, the Clinton Administration launched a series of lawsuits against power plants and oil refineries for violating NSR requirements.⁷ Two of these suits were successfully settled, resulting in an annual emissions reduction of SO2 and NO2 of a quarter million tons.⁸ Unfortunately, under the Bush Administration, all momentum in these cases has been lost due to the occurrence of two events.

First, in May 2001, the Bush Administration directed EPA to initiate a 90-day review of NSR requirements (which review continues today, nearly ten months later). As a result, the EPA and the Department of Energy have engaged in very public wrangling regarding "proposed revisions" to NSR requirements.⁹ The second event was the Bush Administration’s announcement of its "Clear Skies Initiative" on February 14, 2002, which addresses emissions of SO2, NO2 and mercury from power plants. If enacted, the "Clear Skies Initiative" would apply to both old and new plants, thus apparently replacing NSR requirements for power plants.¹⁰ There are serious uncertainties as to the effectiveness of the "Clear Skies Initiative," among them, how facilities will achieve the emissions reductions required to meet the ambitions caps proposed by the plan and the level of long term limits emissions.¹¹ According to an EPA analysis prepared for Vice President Cheney’s task force, the existing Clean Ai Act programs would reduce power plant emissions in almost half the time as Bush’s "Clear Skies Initiative."¹²

These two developments undermine the integrity of current NSR requirements and send a clear signal to power companies and refineries that the Bush Administration intends to relax emissions controls, thus removing any incentive to come to the table to negotiate a settlement or comply with the law in the short term. Indeed, Administrator Whitman herself acknowledged this fact on March 7, 2002 at a Senate Committee on Governmental Affairs hearing on the Bush Administration’s environmental record. Administrator Whitman stated, "If I were a plaintiff’s attorney, I wouldn’t settle anything until I knew what happened with [the Tennessee Valley Authority] case."¹³ Not surprisingly, two defendants have refused to sign consent decrees to which they agreed fifteen months ago, "hedging their bets while waiting for the Administration’s Clean Air Act reform proposals."¹⁴

Adding fuel to the NSR controversy, the Mercatus Center nominated NSR regulations for "review or rescission" and, in its 2001 Costs and Benefits Report to Congress, OIRA identified the regulations as "high priority" for review. Mercatus supported the nomination of the NSR regulations asserting that they are a "deterrent to investment in new oil refinery and power generation capacity" and that "EPA’s aggressive application of NSR provide[s] perverse incentives and encourage litigation." Mercatus suggested that EPA use the "settlement process to alter its NSR policy."¹⁵

Mercatus’ comments are entirely without merit. First, the Justice Department has already determined that enforcement of NSR is not overly aggressive. In May 2001, the National Energy Development Group, headed by Vice-President Dick Cheney, recommended that President Bush direct the Attorney General to "review existing enforcement actions regarding New Source Review to ensure that the enforcement actions are consistent with the Clean Air Act and its regulations."¹⁶ In response to this directive, on January 15, 2002, the Justice Department announced its conclusion that EPA was "justified in suing operators of scores of aging coal-fired power plants that were illegally polluting the atmosphere" and Attorney General John Ashcroft vowed to continue to "vigorously" pursue those cases.¹⁷

Second, as described above, relying on the "settlement process" to amend NSR policy is a joke given the Bush Administration’s undermining of NSR regulations with phantom proposed regulations and Administrator Whitman’s statement advising defendants against settlement. OIRA’s unexplained acceptance of Mercatus’ unfounded arguments supporting "review or rescission" of NSR regulations underscores the pervasive influence of industry in shaping OIRA’s agenda.

——————————————————————

¹ "Rewriting the Rules: The Bush Administration’s Unseen Assault on the Environment," National Resources Defense Council, p. 9 [hereinafter, NRDC Report].
² "New Source Review 90-Day Review Background Paper," June 22, 2001, Environmental Protection Agency, p. 2 [hereinafter NSR Background].
³ NSR Background, p. 2.
⁴ Id. at 8. This estimate represents emission reduction resulting from Best Available Control Technology (BACT) required by only one of the two programs comprising NSR. Thus, actual emissions reduction is significantly higher.
⁵ Data provided to the Senate Environment Committee by EPA, February 27, 2002 letter from Eric V. Schaeffer, former Director of EPA’s Office of Regulatory Enforcement, to Administrator Christine Todd Whitman [hereinafter, Schaeffer Letter].
⁶"White House Warned on Easing Clean Air Rules," Washington Post, Eric Pianin, January 9, 2002 [hereinafter, Post January 9].
⁷ "EPA Veteran Resigns Over Pollution Policy," Washington Post, Eric Pianin, March 1, 2002 [hereinafter, Post March 1].
⁸ Schaeffer Letter.
⁹ Post January 9
¹⁰ See McGarity Testimony.
¹¹ See McGarity Testimony. Many plants already switched from high sulfur coal to cleaner burning lower sulfur coal and natural gas to meet the less ambitious caps established by the acid rain program created by the 1990 Clean Air Act amendments. As a result, companies will likely have to install costly pollution reduction equipment, or acquire the necessary permits to forgo pollution controls, large capital expenditures the will be loath to undertake. Further complicating the issue, the "Clear Skies Initiative" as proposed requires Congress to set caps only for 2010 targets. EPA would later establish 2018 caps after reviewing "new scientific, technology and cost information, and if necessary, adjust[ing] the phase two targets."
¹² Andrew Goldstein, "For Bush, It’s Not Easy Being Green," Time, February 25, 2002.
¹³ Katharine Q. Seelye, "E.P.A. Chief Says Pollution Will Probably Stay Unsettled Until Related Case Is Decided," New York Times, March 8, 2002. It should be noted however, that under the current Administration, the EPA has not filed any new enforcement lawsuits.
¹⁴ Schaeffer Letter
¹⁵ OMB 2001 Report on the Cost of Regulations.
¹⁶ NSR Review, Appendix A.
¹⁷ "Suits Against Power Firms Justified, Justice Department Says," Washington Post, Eric Pianin, January 16, 2002.

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