STATEMENT OF JAMES M. INHOFE

HEARING ON NEW SOURCE REVIEW

JULY 16, 2002

As many of you know, in March of 2001, Sen. Breaux and I wrote the first Congressional letter on the New Source Review (“NSR”) program to Vice President Cheney in his capacity as the Chairman of the National Energy Policy Development Group. Our letter stated that –unless reformed – “EPA's flawed and confusing NSR policies will continue to interfere with our nation’s ability to meet our energy and fuel supply needs.”

[PLACE LETTER INTO RECORD]

I want to publicly thank the Administration for being responsive to Sen. Breaux’s and my concerns. I know it took real courage to pursue NSR reforms. It took courage because the President knew that many people will misconstrue these reforms as “a sneak attack on the environment” in a attempt to score cheap political points and fund raise. Despite all the rhetoric we will hear today about NSR reforms and the process of developing these reforms, make no mistake: President Bush’s decision will result in a cleaner environment and greater energy security.

The Clinton Administration developed the draft proposals and accumulated over 130,000 comments on NSR reforms. In fact, on his last day of work on January 19, 2001, President Clinton’s Air Chief Bob Perciasepe, wrote a letter (1) outlining NSR reforms – which are similar to the Bush Administration’s NSR proposed reforms – and (2) calling for the Bush Administration to consider finalizing the reforms.

[PLACE LETTER INTO THE RECORD]

I now very much look forward to seeing the fruits of the Clinton and Bush Administrations’ labors on this issue.

From my tenure as the Chairman of the Senate's Clean Air Subcommittee, I knew that New Source Review was a major issue for the energy sector. In fact, I held the very first congressional hearing on NSR in February of 2000 in Ohio. I could not believe my own ears in that hearing. We heard from companies, who were trying to make environmentally friendly modifications to their facilities, being stopped dead in their tracks by – ironically – the Clean Air Act. I was also shocked to hear that it took 4,000 pages of guidance documents to explain 20 pages of regulations. Since then, my shock at the absurdity of the NSR program has not worn off.

As a result of my March 2001 letter, a number of stakeholders from all over the country have contacted me to discuss their experience with the NSR program. These examples further shocked me. So much so, that Sen. Specter and I sent a letter to EPA and DOJ outlining some of the examples. [I would like to place this letter into the record] As If it is not bad enough that no one really understands NSR as a policy, and NSR is stopping projects, which would make facilities cleaner and more efficient. Under the NSR enforcement initiative, I saw numerous examples of poorly directed and costly information requests from the federal government to companies, which were, at the very least, dubious. There were examples of information requests submitted to companies by EPA employees without any official authorization. There were other information requests in the form of photo-copied documents with the name of one facility scratched out and the name of another facility penciled in. There were also requests which were addressed to one facility but referred to operating units of another facility half way across the country. Just to mention a few.

I fully support the strong enforcement of our nation's clean air laws, but I will not stand by and watch what appears at a minimum to be gross incompetence and carelessness by federal employees who appear to care little for the costs involved. As a former businessman, I personally dealt with similar behavior from my government, and it was one of my motivating factors to seek public office. The government must be held accountable for their actions just like everyone else. Despite my letter, I was disappointed to see the apparent lack of interest in this issue by the EPA and Justice department.

We, as nation, need to rethink the manner in which we approach regulation. We all need to keep an open mind. During the debates on various regulatory reform initiatives, I am sick of continually hearing that these efforts are “sneak attacks on the environment.” In fact, it is the opposite. If we rethink regulation, we could find ourselves in a place where we can have far greater environmental protection and more reliable and diverse energy sources.

Congress and the Executive Branch must also do a better job of understanding how these various layers of regulations impact sects of our economy.

[Chart]

For example, as this chart shows, refiners, who are currently working at almost 100% capacity, are going to be simultaneously hit with a number of regulations in the next few years. NSR will make it close to impossible for refiners to make these environmental upgrades. Now is the time to work together on these and other regulations to not only achieve the environmental goals, but also ensure no disruption in fuel supply -- which would cause price spikes.

Higher energy prices affect everyone. However, when the price of energy rises that means the less fortunate in our society must make a decision between keeping the heat and lights on or paying for other essential needs. During a recent EPW Committee hearing – Sen. Voinovich’s constituent – Tom Mullen articulated this concern. Mr. Mullen stated that in a recent study on Public Opinion on Poverty, it was reported that “23% have difficulty in paying their utilities – that is, one out of four Americans.” I will not support policies, such as NSR, which hurt the poor in Oklahoma and around the nation. Additionally, the lower environmental performance – resulting from the current

NSR program– impacts Americans in every tax bracket.

NSR reforms enjoys the support of a wide range of interests – from states’ Attorneys General to labor Unions to business groups.

[Submit letters from the U.S. Chamber of Commerce and the International Brotherhood of Boilermakers in support of NSR reform.]

President Bush cannot continue to place layer after layer of regulations without any consideration of their energy implications. The environmental community does not have to answer to the American people when energy prices go through the roof or to worry about the national security implications of greater dependence on foreign energy sources. However, the President does. He is doing the right thing, and I applaud him for it.