The issues before the Subcommittee this morning are numerous and complex. I commend the Subcommittee for its efforts to develop policy approaches that are mindful of the necessary connection between sustainable energy and environmental policies. Through thoughtful dialogue and determined policy, the dual goals of clean air and plentiful low cost energy are mutually reinforcing. However, it is equally true that efforts which focus myopically only on energy or the environment, to the exclusion of the other, are doomed to fail.
The present focus on our nation's energy supply presents challenges and opportunities. It is understandable yet regrettable that our body politic tends to focus its attention on energy policy primarily during moments of predicted or realized scarcity. It is at these times when the fundamental vulnerability of our nation's dependence on a monoculture of imported petroleum is most pronounced. Unfortunately, it is at these same moments when long-term strategies to achieve real energy security are often eschewed in favor of quick fixes that promise immediate price relief at the pump or at the switch. A meaningful national energy policy must address both the supply and demand sides of our energy equation. On the supply side, we must develop a diverse portfolio of sustainable energy sources that can be developed without exacting an unacceptable toll on the natural environment and public health. On the demand side, we must begin to confront the careless waste and inefficiency that far too often describe our nation's consumption of scarce energy resources.
It is worth noting that Congress has boldly grappled with these questions before. The Energy Policy Act of 1992, explicitly acknowledged the unsustainable course of our hydrocarbon economy and set a reasoned goal to diversify our motor fuels supply using domestically produced non-petroleum alternatives. Under EPACT, 75% of the vehicles procured by the federal government were slated to operate on non-petroleum alternative fuels by 1999. By last year, EPACT established the goal that a full 10% of our nation's motor fuel be displaced by non-petroleum alternatives. By 2010, EPACT envisions that a minimum of 30% of our nation's motor fuel will be derived from non-petroleum sources.
Our progress toward these goals has been woeful. At present, less than 1% of the motor fuel used on this nation's highways is derived from non-petroleum alternatives and there are no meaningful federal efforts underway to achieve the EPACT goals for 2010. In fact, the Energy Information Association recently reported that U.S. oil demand is forecast to jump from the current 20 million barrels per day to 26 million barrels per day by 2020. Last year alone, our nation spent over $100 billion for imported oil. On March 15, of this year, the Associated Press reported that our nation's trade deficit surged to an all time high of $435.4 billion (up 31.3%) on a huge rise in imports of oil. As a founding member of the Governors' Ethanol Coalition, I recognize Chairman Voinovich, that you appreciate better than I the need to promote domestically produced renewable fuels. I respectfully submit that had our nation directed the necessary public and private resources and technological commitment toward achieving the promise of EPACT, the substance and mood of today's discussion and the scope of our policy options would be very different.
I would now like to briefly discuss three specific environmental regulatory policies that present opportunities to better harmonize our nation's air quality and energy policy goals. First I will review two recent EPA efforts to address the toxic emissions from motor vehicles. Then I will review the basis for the Northeast States' view that Congress must act to lift the oxygen mandate in the federal Reformulated Gasoline Program.
Mobile Source Toxics
As we chart a long-term course to harmonize our environmental and energy needs, we must begin to grapple more effectively with the problem of toxic air pollution resulting from the combustion of motor fuels. Over a decade ago, Congress reacted to the growing body of evidence identifying motor vehicles as the dominant source of toxic air pollution in the nation by adopting Section 202(l) of the of the Clean Air Act Amendments of 1990 (Act). The Clean Air Act requires the Agency to produce a study on the "need for, and feasibility of, controlling emissions of air toxic pollutants which are...associated with motor vehicles and motor vehicle fuels (sec. 202(l)(1))." The Act instructs the Agency to focus on "those categories of emissions that pose the greatest risk to human health." Section 2020(l)(2) then directs the Agency to "promulgate regulations . . . to control hazardous air pollutants from motor vehicles and motor vehicle fuels." These standards - at a minimum for benzene and formaldehyde - should "reflect the greatest degree of emission reduction achievable through the application of technology which will be available."
In its legislative history, Congress instructed EPA to "broadly characterize the urban air toxic problem by conducting ambient monitoring" in order to determine the "true scope of the problem." Congress characterized EPA's previous efforts in the area of regulating air toxics as "this record of false starts and failed opportunities." It stated explicitly: "The Environmental Protection Agency has not made sufficient use of the existing authorities available under section 112 of the Clean Air Act to protect public health."
Unfortunately, EPA's efforts to carry out the requirements of this section and the intent of Congress over the last decade have been uninspired. In 1993, EPA identified mobile source emission from on-road vehicles as the number one source of hazardous air pollutant emissions in the country. However, EPA failed to promulgate a regulatory determination as required by statute to address these toxic contaminants. In 1998, EPA published the results of the Cumulative Exposure Project (CEP), which estimated that ambient concentrations of seven cancer-causing compounds exceed federal-health protective thresholds in every census tract in the country.
In the Northeast, and across the country ambient levels of four pollutants: benzene, 1,3 butadiene, formaldehyde and acetaldehyde exceed health-based cancer and non-cancer thresholds by one and sometimes two orders of magnitude. The CEP, and subsequent analysis by the NESCAUM states conclude that mobile sources are responsible for the vast majority of emissions of these four compounds. In the face of this information, EPA still failed to act. Finally, earlier this month under Court order, EPA promulgated regulations under 202(l) that set a backstop to prevent the average toxicity of gasoline from increasing, but offers no new strategies to mitigate the unacceptable risks posed by mobile source air toxic emissions. The Northeast states are disappointed that it has taken the Agency ten years to promulgate regulations under Section 202(l) that will provide no air quality benefits to our member states. These views are expressed rather strongly in comments NESCAUM delivered on the rule proposal that I would like to submit to the record (attachment 1).
The most valuable aspect of the recently promulgated rule is EPA's forthright acknowledgement of the gaps in the Agency's understanding about key aspects of the mobile source air toxics problem and its commitment to work with the states and other interested parties to cure these inadequacies and propose new regulations no later than July 2003. Specifically EPA commits to: 1) evaluate and re-assess the need for, and level of controls for both on-highway and nonroad sources of air toxics; 2) develop better air toxics emission factors for nonroad sources; 3) improve estimates of air toxics exposures in microenvironments; 4) improve consideration of the range of total public exposure to air toxics; and 5) increase our understanding of the effectiveness and costs of vehicle, fuel, and nonroad controls for air toxics.
While we trust the sincerity of EPA's commitment to address these issues through a robust research agenda and welcome the opportunity to contribute to this process, we recognize that the questions that EPA now seeks to address are the very same questions that the Agency failed to confront over the past decade. We ask that this Subcommittee join the states in working to support this effort and conduct the oversight necessary to ensure that this critical section of the Act is fully and faithfully executed.
Diesel Emission Control Efforts - Consent Decrees
Diesel engines remain the life-blood of commercial transportation in this country. However, the failure to date to adequately control the pollutant emission from diesel engines has exacted an unacceptable and unnecessary toll on the health of our citizens, especially those who reside in urban areas where diesel vehicles are most concentrated. Two ongoing initiatives hold potential to dramatically improve the environmental performance of diesel engines and diesel fuels. The stakes are very high. If successful, these efforts will enable our nation to continue to responsibly rely on diesel engines for years to come. However, if these efforts fail, our nation will continue to be forced to choose between the economic benefits provided by the diesel engine and the health of our citizens.
First, 1998, five diesel engine manufacturers (Caterpillar, Cummins, Detroit Diesel, Mack Trucks, and Volvo) entered into binding consent decrees to remedy the most substantial violation of our clean air laws since the passage of the Clean Air Act. In essence, these engine makers had designed and marketed over one million engines that appeared to meet the emission requirements when tested in a controlled laboratory environment but then dramatically exceeded these standards, by as much as 300%, when operated on our nation's highways. This flouting of our environmental laws will result in excess emissions of roughly 100 million tons of NOx over the course of the next 20 years. To mitigate the consequences of this illegal behavior, engine manufacturers committed to a host of activities including the early introduction of cleaner engines in 2002, a commitment to retrofit non-complying engines when they are brought in for engine rebuilds, and a commitment to design engines to meet a "not to exceed" (NTE) standard to ensure that engines when operated on the road reflect the emission profile promised in the laboratory. These commitments were the product of months of intensive negotiations that enabled the defendant companies to avoid potential criminal penalties and also allowed these companies to continue to market non-complying engines until the transition to cleaner engines could be economically completed in 2004.
It has come to our attention that many of these same companies are now seeking relief from their own consent decree commitments. I would like to submit to the record a letter dated February 5, 2001 from the Detroit Diesel Company to Administrator Whitman seeking relief from the commitment to market clean engines beginning in 2002 (attachment 2). This request comes on the heels of a series of requests to create exceptions to the NTE requirements and a growing body of evidence that the rebuild programs established in the consent decrees will not realize their promised environmental benefits. Even if all these programs are implemented as promised, the consent decrees still would allow 12 million tons of excess NOx to pollute our states and frustrate our attainment efforts. We simply cannot afford to weaken the commitments that form the basis of these consent agreements. If some engine manufacturers cannot fulfill the commitments established under the consent agreements, alternative reduction obligations must be established that more than offset these failures. Anything less unfairly rewards those companies that have failed to live up to their commitments at the competitive expense of those companies that have strived to succeed.
The consent decrees were negotiated in private through a legal process largely void of the public engagement we have come to rely on under the Administrative Procedures Act. Because of this, states and other interested parties have been largely shut out of these negotiated settlements. We urge this Subcommittee to look into the recent developments in the implementation of the consent decrees in order to ensure that the public receives the full benefit of the legal bargain.
Diesel Emission Control Efforts - 2007 Rule
The Northeast States wish to express our appreciation to the Administration and EPA for their decision to move forward with the implementation of the new diesel standards for model year 2007 and later engines. This rule is critical to state efforts to attain the air quality standards for ozone and to protect the public from toxic air pollutants such as particulate, formaldehyde, and acetaldehyde. The rulemaking process that produced this regulation was both extensive and inclusive. During the rulemaking process, EPA garnered written input from over 370 stakeholders and worked closely interested parties in the development of the final rule. The broad support for this rule is evident in a March 19, 2001 letter to Administrator Whitman. A broad coalition including automobile manufacturers, trucking associations, environmental groups, states, and truck and engine manufacturers joined together to express our appreciation for the enormous public health and environmental benefits that will be achieved by under this regulation. I wish to submit a copy of this letter for the hearing record (attachment 3).
While some continue to assert that this rule poses a long-term threat to the refiners of diesel fuel and the makers of diesel engines, nothing could be farther from the truth. In fact, this rule must be fairly understood to have saved the diesel engine from inevitable demise due to the unacceptable threat it has to date posed to public health. Once this rule is fully implemented the words "clean" and "diesel" will for the first time rightfully belong in the same sentence. By promulgating a comprehensive approach that simultaneously addresses both diesel engines and the quality of diesel fuel, the Agency has created a role for the continued reliance on diesel-powered engines for years to come.
The 2007 clean diesel rule rests on a successful history of technology advancing environmental regulation. Time and again, our nation has proven that when given adequate lead-time and clear performance standards, American industries possess the technological knowledge and innovative ability to produce products that meet our public health and environmental needs. The Northeast states are concerned by reports that the Administration is considering upsetting this time honored dynamic by imposing a third-party technical review, such as by the National Academy of Sciences, on the clean diesel rule. While certainly well intended, this idea is likely to do far more harm than good by creating a climate of uncertainty that could lead refiners and engine manufacturers to postpone investment in technology research, development and physical plant upgrades that form the basis of their compliance strategy.
EPA has provided more than five years of lead time for fuel providers and the manufactures of emission control equipment to put in place the necessary infrastructure and technical changes needed to meet the requirements of the rule. Through the federal Clean Air Act Advisory Committee (CAAAC), Congress has already established a forum that EPA effectively employs to secure meaningful and timely public input on ongoing regulatory initiatives. Already, the Agency maintains a Mobile Source Technical Review Subcommittee of the full FACA Committee comprised of technical experts from industry, academia, states and public health advocacy organizations. This subcommittee is well suited to oversee progress on implementation of the 2007 rule. In contrast, formation of a third party review to question the basis of the standards has potential to become a self-fulfilling prophecy for failure by undermining the certainty corporations need to invest for success. Moreover, third party reviews defeat the democratic process envisioned and required under the Administrative Procedures Act. We believe the Agency conducted an extensive, inclusive and effective rule-making process. Those who disagree have already sought to legitimately express their concern through the judicial process. Anointing a group technically trained individuals to second-guess the Agency's rulemaking process, disconnected from the transparency and public participation required under the Administrative Procedures Act, is undermining to this regulation in particular and to the rulemaking process in general.
Reformulated Gasoline, MTBE, Ethanol and the Oxygen Mandate
Our region has much at stake in the debate over RFG, MTBE and ethanol. Seven of our eight states have or are participating in the federal RFG program. The use of RFG in the Northeast has provided substantial reductions in smog forming emissions and has dramatically reduced emissions of benzene and other known human carcinogens found in vehicle exhaust. However, the unique characteristics of MTBE pose unacceptable risks to our region's potable ground water. Groundwater testing conducted throughout the northeast has detected low levels of MTBE in roughly fifteen percent of the drinking water tested. Nearly one percent of samples tested contained MTBE at or near state drinking water standards. MTBE's unpleasant taste and odor at higher concentrations and the frequency of MTBE detections poses a disproportionate and unacceptable threat to our region's drinking water.
The challenge facing us all is to mitigate the environmental and economic harms caused by MTBE contamination without sacrificing the environmental and public health benefits provided by RFG and without undermining a reliable supply of low-cost gasoline. Unfortunately, the law as currently written prevents both EPA and the states from effectively facing this challenge. The oxygen standard leaves states to choose between the "rock" of MTBE contamination and the "hard place" of a summertime ethanol mandate that will result in either environmental backsliding, gasoline price increases or a combination of both.
It is simply not possible to protect air quality, water quality and ensure gasoline price stability unless the oxygen mandate is lifted or, at a minimum, modified to require EPA to waive this requirement upon state request. Unless the oxygen requirement is lifted or waived, a substantial reduction in MTBE use creates a de facto summertime ethanol mandate. While ethanol usage is far preferable to MTBE from a groundwater perspective and promotion of ethanol can further a host of energy, agricultural, and environmental goals, an ethanol mandate in the summertime reformulated gasoline program is not sound environmental or economic policy for the Northeast. Due to its high volatility and resulting increase in evaporative emissions, the use of ethanol during the summertime ozone season may actually exacerbate our urban and regional smog problems, absent further protections.
The tension between environmental quality and fuel costs posed by a de facto ethanol mandate in RFG is demonstrated by recent EPA and state actions. On March 15, 2001 Adminstrator Whitman announced that EPA was proposing to relax the environmental performance requirements for RFG containing ethanol out of concern for summertime price increases like those experienced in Chicago and Milwaukee last summer. The lead to the EPA press release reads:
"Administrator Christie Whitman today told the Speaker of the House and members of the Illinois and Wisconsin Congressional delegations that EPA is very close to reaching a decision that should help reduce the costs for blending ethanol into gasoline."
The release quotes Administrator Whitman stating, "...I recently directed EPA staff to finalize an upward adjustment to the VOC standard...which will provide greater flexibility than the .2 pounds that was originally proposed." I would like to submit a copy of the EPA statement to the hearing record (attachment 4).
In plain terms, EPA is weakening the environmental performance of RFG blended with ethanol out of concern over price increases. If ethanol can not be relied upon as a cost-effective means to satisfy the RFG requirements in the states where it is produced, we in the Northeast shudder at the potential cost implications and/or the weakening of environmental performance requirements that will result from imposition of a de facto ethanol mandate in our region.
EPA's decision to incrementally weaken the RFG program to accommodate ethanol is even more unfortunate when one realizes that the Agency could provide far more robust consumer protection without weakening the environmental performance of RFG laws by granting state requests to waive the oxygen mandate altogether. On March 27, 2001 a diverse group of state environmental agencies, water quality agencies, oil companies, fuel suppliers, retailers, and refiners, wrote to Administrator Whitman to urge EPA to act quickly to approve California's petition for relief from the oxygen standard. I would like to submit a copy of this letter to the record (attachment 5). This broad support for lifting the oxygen mandate by rule or through statute remains the key to fixing the RFG program. I would like to thank Senator Inhofe for his efforts last year to advance legislation that enabled states to waive application of the oxygen standard. The Northeast states look forward to continuing to work with you and Chairman Smith in the Full Committee to pass such legislation this year.
In the absence of federal efforts, states are left to choose between continued MTBE contamination and an ill designed and unwise summertime ethanol mandate. The State of Connecticut is on the leading edge of this unfortunate choice having adopted a legislative ban on MTBE which takes effect in 2003. In a March 14, 2001 report from Arthur J. Rocque, Commissioner of the Connecticut Department of Environmental Protection (DEP), to the State Legislature, the Commissioner writes:
"The ban on MTBE effective in the year 2003 is not prudent for the state of Connecticut and we recommend that the Environment Committee consider changing the date of the ban. If this action is not taken, Connecticut's position in the region as the first and only state to ban MTBE while required under the Clean Air Act to comply with the federal reformulated gasoline program (RFG) will likely result in one of several undesirable options. These options could include: the delivery of special or non-compliant gasoline or an increase in the price of gasoline conservatively estimated in the range of 3-11 cents per gallon."
I would like to submit a full copy of the Connecticut Report for the record (attachment 6). There is no question that it is possible to dramatically increase domestic ethanol production. Similarly there is no question that it is possible to ship massive quantities of ethanol to the northeast by barge, rail and truck. The question remains at what cost. While our region embraces the goal of increasing renewable fuels nationally and sees great promise in the development of a biomass ethanol industry in the Northeast, we are convinced that there are policy approaches to achieve these legitimate ends that are far preferable to mandating the use of ethanol in summertime RFG.
Conclusion
In sum, the Northeast states are committed to working with Congress and the Administration to develop mutually supporting and sustainable air quality and energy policies. I'd like again to thank the subcommittee for the opportunity to testify here today.