The American Energy Initiative: A Focus on EPA's Greenhouse Gas Regulations

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Panel I
Robb MacKie
President and CEO, American Bakers Association
Carl Shaffer
President, Pennsylvania Farm Bureau 
Charles Smith
President and CEO, CountryMark Cooperative LLP
William Chameides
Dean, Nicholas School of the Environment, Duke University
Daniel Weiss
Senior Fellow and Director of Climate Strategy, Center for American Progress
Louis Cox, Jr.
President, Cox Associates
Gerry Sweeney
President and CEO, Rain Cll Carbon LLC

Panel II
David Wright 
Commissioner and Vice-Chairman, Public Service Commission of South Carolina
Steven Winberg
Vice President, Research and Development, CONSOL Energy Inc.
Barbara Walz
Senior Vice President for External Relations and Environment, Tri-State Generation and Transmission Association, Inc. 
David Doniger
Policy Director, Climate and Clean Air Program
Subcommittee Members Present:
Ed Whitfield (R-KY), Chair
Bobby Rush (D-IL), Ranking Member
John Sarbanes (D-MD)
Greg Walden (R-OR)
Lee Terry (R-NE)
David McKinley (R-WV)
Mike Pompeo (R-KS)
Morgan Griffith (R-VA)
Joe Barton (R-TX)
Gene Green (D-TX)
Brian Bilbray (R-CA)
Pete Olson (R-TX)
Full Committee Members Present:
Fred Upton (R-MI), Chair
Henry Waxman (D-CA), Ranking Member
On June 19, 2012, the House Committee on Energy and Commerce, Subcommittee on Energy and Power held a hearing to discuss the current, pending, and potential future greenhouse gas regulations instituted by the United States Environmental Protection Agency (EPA) under the authority of the Clean Air Act (CAA, 42 U.S.C. 7401-7671). Following the 2009 EPA Endangerment Finding, which states that atmospheric concentrations of carbon dioxide and five other greenhouse gas emissions (GHG) endanger public health and welfare, the EPA enacted Mobile Source Regulations, Stationary Source Regulations including a Prevention of Significant Deterioration (PSD) permitting program and New Source Performance Standards (NSPS), and GHG reporting regulations. The hearing focused on the potential impacts of the new regulations on the economy, the job market, and consumers.
Chairman Ed Whitfield (R-KY) opened the hearing with concerns that the EPA GHG emission regulations exhibit “regulatory overreach” and essentially serve as a “backdoor cap and tax policy.” Whitfield asserted that legislative action to address climate change should lie with Congress due to the high volume of regulations, the underestimation of costs, and direct job loss associated with EPA regulatory oversight. Whitfield cited examples of federal court decisions that support his position, including the Sackett vs EPA decision which rejected EPA efforts to deny due process to landowners, the Luminant Generation Company, LLC et al vs EPA case which overturned the EPA’s “arbitrary and capricious” rejection of three Texas permitting regulations for Pollution Control Projects, and the Mingo Logan Coal Company vs. EPA decision that overturned the EPA’s attempt to invalidate a West Virginia coal mining permit. Whitfield concluded that the “EPA-fulfilled prophesy that no new coal plants will be built in this country” will destroy jobs and increase electricity costs for consumers.
In his opening remarks, Ranking Member Bobby Rush (D-IL) stated that the classification of the EPA regulations as “unnecessary job-killers” rejects peer-reviewed studies and scientific research, and “illegitimately” denies that the regulations could lead to healthier livelihoods for citizens. Representative Rush stressed that mitigating GHG emissions would increase the number of jobs, rather than eliminate them. He cited a Chicago Tribune article entitled “Extraordinary Extremes: Climate Scientists Explain Our Crazy Weather,” which discussed the record-breaking heat in Chicago and significant increase in reported tornadoes throughout the country during March 2012. Rush then explained that this article, scientific models, and climate research provide evidence of the tie between natural disasters and human-induced climate change. He listed several steps that could be taken to mitigate the effects of climate change, save consumers money on utility bills, reduce dependence on foreign oil, and protect the environment. His suggestions included investment in renewable energy, advancement of efficiency policies, improving appliance technology, and producing fuel-efficient vehicles.
Full Committee Chairman Fred Upton (R-MI) remarked that the former cap-and-trade initiative was “bad news all around,” however the new GHG regulations “are looking worse.” Upton claimed that the proposed permitting requirements for power plants and the agricultural industry would be an economic roadblock that would “reverberate throughout the rest of the economy.” Upton mentioned his Energy Tax Prevention Act of 2011 (H.R. 910) to amend the CAA and reverse the GHG regulatory authority given to the EPA. He concluded that this bill would ensure a “pro-jobs, pro-growth, and pro-energy future for America.”
In his opening remarks, Representative Joe Barton (R-TX) focused on the small projected change in temperatures as a result of climate change. He stated that the small temperature would not lead to a significant adverse health effect for an individual. Rather, the additional $7 trillion in costs needed to reach GHG emission reduction standards will more negatively affect the nation. He used tail pipe emissions covered in the Light-Duty Vehicle Standards as an example, claiming the standards would require up to $4000 per car in additional production costs.
In his opening statement, Full Committee Ranking Member Henry Waxman (D-CA) described some of the significant impacts caused by climate change such as ocean acidification and decreasing crop yields. He claimed that the Republican Party has denied the evidence presented in review reports released by the International Energy Agency (IEA), the Vatican, and the National Academy of Sciences. The majority party has voted 37 times on the House floor to block efforts to reduce climate change, 45 times to prevent investments into clean energy and energy efficiency, and numerous times against cleaner vehicles and incandescent light bulbs. Waxman said the North Carolina bill to reject the use of projected rates of sea level rise for state planning exemplifies the failure of Republican legislators to “accept reality.” He concluded that the “price of denial will be paid by American entrepreneurs, workers, and communities” and by “many generations to come, starting with our own children and grandchildren.”
Robb MacKie, President and CEO of the American Bakers Association (ABA), began the first panel of testimonies by describing the adverse economic effects of the CAA regulations on the wholesale baking industry. He highlighted the magnitude of the baking industry which consists of more than 700 baking facilities and suppliers, generates more than $102 billion in annual revenue, and employs 600,000 people. MacKie informed the Committee that 20 percent of the baking industry is currently covered under Title V permits to reduce emissions. A larger portion of the baking industry would be required to participate under the new permitting process, which would lower the carbon dioxide emissions threshold to 250 tons per year (tpy). He said this would increase compliance costs and constrict bakers’ ability to respond to market demands. MacKie expressed particular concern over the PSD regulation on “biogenic” carbon dioxide, which includes emissions released during the natural fermentation of yeast when dough rises. The EPA PSD regulations require precise emissions estimations, but MacKie said measuring yeast carbon dioxide would be “technologically challenging and costly.” MacKie concluded that the “overly broad” EPA tailoring rule, which determines the stationary facilities that must comply to CAA permitting programs, would force American families to pay more for baked goods.
President of Pennsylvania Bureau Carl Shaffer testified on the permitting processes required in the farming industry under the CAA. He noted that the tailoring rule regulations for GHGs extends the requirement of NSR/PSD and Title V permits to smaller farms and result in many unintended consequences. Shaffer estimated that average additional costs due to permitting requirements would be $23,000 per farm: a total of $866 million in the agricultural sector from for Title V permits alone. He said the animal industry would be the most affected because about 90 percent of livestock production emits between 100-250,000 tpy of GHGs, which makes them subject to Title V permit requirements. Shaffer said the CAA thresholds of major GHG sources, those that emit more than 100-250tpy, “cannot be changed through regulation” and allow “little or no flexibility.” He concluded that regulation of utilities, refineries, manufacturers, and other input providers incur indirect costs on farmers and ranchers and applauded the goals of H.R. 910 to prevent these additional costs on agriculture.
In his testimony, Charles Smith of CountryMark Cooperative discussed the costs his company would have to incur under additional EPA regulations. He stated that the EPA estimates of compliance costs are underestimated and gave the example of the EPA cost estimate of $9,500 for installation of Continuous Emission Monitoring Systems, when the actual cost of installation for CountryMark was $450,000. Smith stated that replacement of the tailoring rule by the New Source Performance Standards (NSPS) to establish GHG statutory limits of 100 and 250tpy would be “orders of magnitude more stringent” for refineries. He finished his testimony with a statement that EPA mandates would increase capital, operating, and product costs and reduce domestic refining capacity. He recommended that “rational, reasonable cost analyses” are conducted for EPA regulations.
In the following testimony Daniel Weiss, Director of Climate Strategy for the Center for American Progress, described the significance of the 2007 Massachusetts vs. EPA ruling. As a result of the case, the Supreme Court ruled that the CAA applies to pollutants that contribute to global warming, giving the EPA the authority to set GHG emissions limitations. Regulations under the Obama Administration have set a goal to have the largest facilities reduce emissions by 7000 tpy. Weiss asserted that this goal would have no net impact on the economy. Partisan claims that the EPA is instigating a “war on coal” are “untrue,” Weiss said. Coal companies are supported by carbon capture and storage (CCS) research and development funding established under the American Recovery and Reinvestment Act (P.L. 111-5). Weiss then commented on the public health effects associated with human-induced climate change and cited an article that said California has seen 20 times as many cases of West Nile Virus in mosquitoes which Weiss attributed to global warming. Weiss suggested that the House “help reduce the threat to Americans’ health, safety, and jobs posed by climate change.”
William Chameides, Dean of the Nicholas School of Environment at Duke University, testified on the America’s Climate Choices 2012 Report issued by the National Research Council. The report’s findings state that climate change is caused by GHGs and poses risks to humans and natural systems, the impacts indicate a pressing need to prepare for the impact with federal policies, and uncertainties about the severity of climate change impacts are not a reason for inaction. Chameides mentioned the evidence of rising temperatures, measurements of the highest carbon dioxide concentrations in the past 600,000 years, and studies that show natural systems, such as volcanoes, are not the cause of recent climate trends. He said the adverse changes in climate will be “difficult or impossible to undo” and if emissions are reduced soon, the associated risks and costs will be less. He concluded that an iterative risk management approach that is flexible and adaptable is key to reducing the impacts of climate change.
Louis Cox, Jr. focused his testimony on the public health effects associated with GHG emissions. He asserted that the predictions that tighter GHG regulations could reduce mortality rates among the elderly and save lives are not based on careful research analyses. Cox said the data does not predict that physiological changes in individuals do not occur following changes in GHG pollution levels. In fact, the rising temperatures caused by climate change lead to fewer deaths relative to abnormally cold temperatures. Rather than rely on “invalidated assumptions,” Cox suggested scientists conduct independently verifiable risk analyses before assuming a causal relationship between health and GHG emissions.
In his testimony Gerry Sweeney, president and CEO of one of the largest producers of calcined petroleum coke, discussed the importance of energy cogeneration to allow the capture of byproduct heat, lower costs, reduce GHG emissions, and ultimately increase international competitiveness. Sweeney stated that investment incentives would be more effective than regulations. The regulations his company, Rain CII, is already subject to are “lengthy and costly” and the new CAA regulations would impact the manufacturing sector with higher operation costs and higher electricity prices. He emphasized that delay from regulatory uncertainty risks losing commercial industrial opportunities to “more nimble competition abroad.”
Chairman Whitfield began the first question and answer period by asking Cox to explain in more detail the public health risks caused by GHG emissions and what assessments are needed to better evaluate the risks. Cox replied that the only public health effect would be from heat waves caused by rising temperatures and that scientists are using unreliable computer simulations to assume air toxicity health impacts. Representative Whitfield asked the panel to verify that low-sulfur requirements have inadvertently led to an increase in emissions. Weiss commented that this is correct because many installation and process changes increase the GHG emissions the EPA is trying to control. Whitfield then asked how the tailoring rule regulations are integrated into the farming process. Shaffer responded that it is true that regulations could affect everything from manure management to space heating to operating for drying and curing, and said he was uncertain how the farming community would be able to deal with the costs.
Ranking Member Rush asked William Chameides to respond to Cox’s comments that climate change has no effect on public health. Chameides acknowledged that finding causal relationships between air quality and mortality is difficult, however there are methods to look at past public health trends and model future scenarios. He used examples of the power plant shutdowns for the 1996 Olympics in Atlanta, Georgia which led to a decrease in the number of hospital visits, and the 2003 record heat wave in Europe that killed 20,000-35,000 people.
Representative Barton stated that the EPA Endangerment Finding as a “preconceived conclusion” and said the original 1990 CAA amendments were not intended to cover GHG emissions as a criteria pollutant. He recommended that congressional leaders have a “real debate” on GHG emission regulations as applied to the CAA.
Representative Waxman asked if the United States should expect to see more extreme weather events in addition to the intense heat waves and increased frequency of heavy precipitation. Chameides replied that more extreme weather is expected, but it is difficult to connect these events to climate change. Waxman questioned whether the U.S. should be concerned about melting permafrost and what should be done to address this issue. Chameides responded that permafrost melt will emit methane, a potent GHG. He concluded that with every ton of GHG that is emitted, there is an increased risk for geopolitical problems, poor public health, loss of adequate and clean water supplies, waste of clean energy investments, and unsustainable environmental conditions.
Representative Lee Terry (R-NE) directed questions about GHG emissions from farms to Carl Shaffer. Shaffer responded that average farm will be over the EPA GHG limit of 250 tpy and would have to comply with Title V permits. Shaffer expressed concern that the more stringent restrictions coincide with a time when the nation needs to recruit more farmers and the only way to fall below the emissions threshold is to reduce the quantity of livestock.
Representative Gene Green (D-TX) asked what role congress could have in reducing the effects of climate change. Chameides recommended instituting adaptation preparations and policies that would create a level playing field for clean energy in the marketplace.
Congressman David McKinley (R-WV) stated that many are losing jobs because of the administration’s “war on coal.” Representative Morgan Griffith (R-VA) added that he is concerned about the need for international collaboration to improve global air quality. Chameides agreed that GHG emissions are an international problem, “but traditionally America has been a world leader.”
Representative Mike Pompeo (R-KS) stated that 37,350 farms would be regulated by the EPA if the tailoring rule was overturned and asked if this would be economically significant. Shaffer said this would create “unfair competition” between large and small farmers, delay operating and construction timeline, and require re-permitting every five years. Representative Greg Walden (R-OR) reiterated Representative Pompeo’s concerns that about the economic impacts of GHG regulations. Shaffer said the new permitting requirements would have reduced the economic viability of small farms and have a “ripple-down effect” on the local community. Witness Gerry Sweeney added that permitting costs will put international limitations on business.
Representative John Sarbanes (D-MD) asked what the consequences would be if the federal government does not take action to plan and create adaptation procedures for future climate change. Although the full impacts of climate change will not manifest for another 20 to 30 years, Chameides recommended that preparation for the effects of climate change should be analogous to fire-prevention building codes and become an integral part of future infrastructure planning. He concluded that the federal government could have a critical role in coordination, information sharing, and community empowerment.
Representative Pete Olson (R-TX) concluded the first panel discussion with a statement that the EPA should be required to conduct a thorough economic analysis on the costs that could result from the GHG regulations.
During the second panel, David Wright of the National Association of Regulatory Utility Commissioners (NARUC) described the impacts the regulations on electric utility generating units under the EPA NSPS for GHG emissions would have on the power sector. Wright emphasized that the standards are based on the performance of natural gas combined-cycle units (NGCC) and exclude transitional sources, coal-fired power plants that commence construction within 12 months of the proposal date. He said NARUC is concerned that these qualifications will affect resource diversity and consumer costs. Furthermore, NARUC is concerned that new regulations would create uncertainty about existing power sources and result in over-reliance on natural gas. Wright summarized an economic study on the impact of mercury regulation, the Cross-State Air Pollution Rule (CSAPR), the coal-combustion residuals rule, and the cooling water intake structures regulation, which estimated an additional $21 billion in annual costs between 2012 and 2020. The increase in production costs could raise average retail electricity prices by 6.5 percent. Wright concluded that the U.S. needs to increase environmental performance while maintaining energy reliability and stable utility rates.
In his testimony, David Doniger of the Natural Resources Defense Council (NRDC) told the committee of the widespread national support for reductions in carbon pollution. He said 60 percent of Americans believe carbon pollution will result in staggering health costs and two million Americans support the EPA carbon pollution standard for new power plants. He cited the American Electric Power v. Connecticut Supreme Court decision to allow the EPA to institute a NSPS and reduce the 40 percent contribution to total carbon dioxide emissions from power plants. Doniger emphasized that the EPA standards would have no new effect on the power industry, rate payer, or job market. He concluded that the EPA has helped develop CCS technology and “clean up” the two most polluting sectors—power plants and motor vehicles.
Steven Winberg, Vice President of R&D at CONSOL Energy Incorporated, focused his testimony on the development of CCS technology. Winberg stated that CCS is the most affordable option to reduce carbon dioxide emissions and will be a critical technology for developing countries, where 70 percent of the total global GHG output will source from in 2035. He said CCS is currently too expensive for broad-scale deployment and suppliers are at least 10-15 years from commercializing CCS technologies. Winberg stated that the EPA NSPS will prevent construction of new coal-fired power plants because the technology needed to reduce emissions below the established threshold is not yet available. He said advancing CCS would require an increase in technology investments, a national regulatory framework for carbon dioxide storage, and several pilot-, commercial-scale, coal-fired power plants with applied CCS technology.
In the final testimony, Barbara Walz commented on the efforts of the Tri-State Generation and Transmission Association to provide 1.5 million people with affordable electricity. Walz stated that most of the power is from coal-based power plants. She said the EPA NSPS will “effectively ban the construction of new coal-fired power plants” and will have “far reaching and possibly devastating” effects on rural communities. Walz described that Tri-State’s $70 million investment for a new coal-fired electric generating unit may have to be halted because it does not be able to comply with the “stringent” Mercury and Air Toxics Standards (MATS). She added that the GHG NSPS requirement for coal-fired boilers and natural gas-fired combined cycle turbines to remain below a 1,000 pound carbon dioxide per megawatt-hour is unachievable for nearly all units. She concluded that the EPA has adopted an “unrealistic field of dreams philosophy.” Walz suggested the EPA institute compliance deadlines that allow companies to develop, install, and test new technology and implement “achievable” GHG emission standards.
During the second question and answer period, Chairman Whitfield stated that there are negligible benefits associated with reducing mercury levels under MATS. He asked the panel to comment on the potential rate increases for consumers and the reliability of EPA regulations. Wright responded that the Public Commission of South Carolina has petitioned to have study conducted on the potential impact of EPA regulations and has ongoing dialogue with EPA representatives to discuss compliance costs. Walz said that she is unsure if the $70 million coal-fired power plant will be continued due to unreliable and stringent EPA regulations.
Ranking Member Rush asked Doniger if the EPA is trying to prevent construction of new coal-fired power plants and if the EPA is conducting a “war on coal.” Doniger replied that market realities have driven energy decisions away from conventional coal-fired power plants, regardless of EPA NSPS. He added that the EPA has the partisan-neutral goal to protect public health and the environment from the adverse effects of carbon pollution by encouraging the development of coal-fired plants that use CCS technologies.
Representative McKinley told Doniger his claim that mining employment is increasing is false and that West Virginia lost 1,400 coal jobs in May 2012. McKinley questioned how many CCS facilities were operating in the U.S. Doniger responded that there are currently three being developed. Representative Griffith stated that the increase in electricity rate costs associated with the EPA GHG regulations would negatively affect the poor, middle class, minority, and elderly. Representative Pompeo concluded the hearing and stated that to put the EPA regulations in place is “ludicrous” and the claim that the regulations will not impact ratepayers is “silly.”
Witness testimonies, opening statements, and a webcast of the hearing can be accessed on the House Committee on Energy and Commerce web site.