Testimony of Eliot Spitzer,
Attorney General of the State of New York,
before the United States Senate
Committee on Environment and Public Works
Subcommittee on Clean Air, Wetlands, Private Property,
and Nuclear Safety
Washington D.C.
April 5, 2001

Thank you for inviting me to testify before this subcommittee concerning the interaction between our environmental regulations and our nation's energy policy. This is a critical issue, both in the short-term and over the longer term.

Introduction

While we usually take for granted the electricity that permeates our life and fuels our modern society, we cannot do so any longer. Recent events in California have forced us to look carefully at our energy supply and examine it critically. We must ensure Americans with a reliable and reasonably priced power supply. Moreover, to be reliable over the long term, the supply must be diverse, so that shortages or price spikes in any one fuel do not cause excessive dislocation.

Yet while we seek a secure energy future, we now know that we must also consider the environmental and health impacts of power generation and use. This panel has correctly noted that the two issues are closely linked, given that the power sector is the industrial sector that causes by far the most air pollution. A sound and balanced energy plan will help us to achieve a reliable and clean energy future.

As many of you have noted, we have not been able to implement a comprehensive energy policy at either the federal or state level. Federal programs have been at best sporadic. In New York, energy policy has also been largely sporadic, addressing issues, if at all, on a one-by-one basis. The State Energy Office was abolished eight years ago and any efforts to create and implement a comprehensive state energy plan were dropped. I recently released a report, entitled Attorney General's Action Plan for a Balanced Electric Power Policy in New York State. It can be found at our web site at http://www.oag.state.ny.us/press/reports/power_policy.pdf. I incorporate it with this testimony because I think it represents a comprehensive blueprint at the state level for considering and balancing the needs for electricity and the need to protect our health and environment. I suggest that the federal government could do well to consider such an approach, and I urge you to review the report carefully.

Let me be crystal clear: there need be no conflict between environmental protection and a sound energy policy. Indeed, careful attention to environmental and health protections will enhance, not harm, our energy security. Our energy supply must be reliable and affordable. However, it must not be only superficially inexpensive, appearing cheap because of hidden costs borne elsewhere. An energy supply that is provided at the cost of harm to the public health or the environment -- imposing enormous, but usually unquantified, costs on the American public through health care costs, lost productivity, premature mortality, or lost enjoyment of health or natural resources -- is not in the nation's best interests. Proposals for such a policy will backfire.

I urge you to work together, as we are trying to do in New York, to move the country towards a balanced energy policy and to reject the spurious claim that environmental protections are the cause of the energy squeeze we see today. Environmental protections are not the cause of, but part of the solution to, our energy challenge. It was the lack of demand, not environmental regulations, that led companies not to build new power plants over the last decade; indeed, some environmentalists would support some new plants that, if linked with strong efficiency programs, would take the place of our dirtiest existing plants.

I will not repeat all of the details set forth in the report. Instead, below, I will focus on the clean air litigation that has been the subject of some scrutiny and controversy, in an effort to dispel many of the misperceptions concerning those cases.

Environmental and Health Impacts of Energy Choices.

It is critical that any discussion of energy policies not underestimate the impacts of electricity generation. The level of impacts is simply not acceptable. As Senator Voinovich said, we want to go forward, not backwards. We cannot go forward, however, if we either weaken or ignore existing clean air laws. It was this realization that led New York to its power plant litigation initiative.

Electric utility plants collectively account for about 70 percent of annual sulfur dioxide (SO2) emissions and 30 percent of nitrogen oxide (NOx) emissions in the United States, pollutants that have significant health and environmental impacts. SO2 interacts in the atmosphere to form sulfate aerosols, which may be transported long distances through the air. These transported sulfate aerosols are both acidic and respirable, contributing to acid rain and smog. Particulate matter (PM) is the term for solid or liquid particles found in the air. Particulate matter composed of particles with diameters of 10 micrometers or less is referred to as PM-10, while particles with diameters of 2.5 microns or less are referred to as PM-2.5. Coal fired power plants are a major source of both PM-10 and PM-2.5. Not only do power plants emit PM directly, but emissions of NOx and SO2 from these plants lead to the formation of fine nitrate and sulfate particles that are particularly harmful to the respiratory system.

Numerous studies, from an EPA acid rain study to a National Oceanic and Atmospheric Administration back trajectory analysis, to many private studies, demonstrate conclusively that emissions from coal-fired power plants in the Midwest and mid-Atlantic travel on prevailing winds to the Northeast. One 1985 New York study found that over 80 percent of the sulfate deposition in New York's Adirondack Park came from sources outside New York.

In the eastern United States, sulfate aerosols make up 25 to 50 percent of the inhalable (PM-2.5) particles on average and cause up to 75 percent of the aerosol pollution during extreme transport episodes. People exposed to sulfur dioxide can suffer a variety of respiratory ailments. Nitrogen oxides contribute to the formation of ozone in locations downwind from the source of the pollution. Ground level ozone also contributes to respiratory illnesses. Particulate matter is an extremely harmful pollutant that contributes to a number of respiratory difficulties, ranging from bronchitis to asthma and even premature death. At least one study performed for the federal government has attributed 30,000 premature deaths nationwide each year to fine PM attributable to power plant emissions.

Emissions of NOx and SO2 also cause extensive harm to natural resources. In the atmosphere, NOx and SO2 are converted into nitric and sulfuric acids, which fall to the ground as acid particles, rain, and snow. Power plant emissions are largely responsible for damage to forests, lakes, and wildlife throughout the northeast. For example, acid deposition has caused 20% of the lakes in New York's Adirondack Park region to become too acidic to support fish life. Federal studies conclude that the percentage of acidified lakes is expected to increase or even double over the next four decades unless upwind emissions of NOx and SO2, primarily from coal-fired power plants, are reduced extensively. Similar impacts are seen in the lakes and streams of other northeastern states such as Vermont and New Hampshire. This year, when the record snow pack in northern New York and New England melts, the streams and lakes will suffer a lethal acid shock.

In addition, acid deposition contributes to the widespread death of spruce forests in high elevation areas of the northeast. According to a recent study, more than half of large canopy trees in the Adirondack Mountains of New York and the Green Mountains of Vermont and approximately one quarter of large canopy trees in the White Mountains of New Hampshire have died since the 1960s. Moreover, ozone, which is also a product of NOx emissions, causes foliar injury (injury to plant leaves) and can reduce plant growth and reproduction.

Visibility in Class I national parks and wilderness areas has suffered severe deterioration from manmade haze created in large part by sulfate particles resulting from power plant emissions. Sulfate particles swell up in the often humid weather conditions of the northeast and scatter more light (thereby reducing visibility more) than most other kinds of particles. In Vermont, for instance, sulfates cause about half of the fine particle pollution, but closer to 75% of the visibility impairment obscuring the landscape for visitors and residents.

Nitrogen deposition also contributes to the eutrophication of coastal bays and estuaries, which occurs when an excess of nitrogen causes algae growth that threatens the survival of other aquatic species. For example, the Chesapeake Bay, which has severe eutrophication problems, receives twenty-five percent of its nitrogen from sources of NOx emissions, primarily from power plants located to the west of the Chesapeake Bay watershed. Long Island Sound suffers similar problems, in large part from nitrogen falling onto New York and Connecticut lands, and from there flowing into the Sound.

Finally, New York's and our nation's cultural heritage -- our buildings and our monuments -- are corroding under the onslaught of acid rain. Some of our finest buildings in the Northeast are losing their detail and beginning to look as if they were melting.

These harms of pollution are quite real; they are not merely a matter of environmental preferences. Asthma, premature mortality, and other respiratory diseases cost Americans billions of dollars each year. The loss of recreational jobs, tourism, and commercial fishing, plus the increased expense of water treatment, cost the nation billions each year. The loss of our architectural history is priceless, and it costs many millions each year just to stem the destruction.

New Source Review Law and Regulations

To address these harms of pollution, my office sued the coal-fired power plants that are the source of much of this air pollution. We filed notices of intent to sue against 17 coal-fired electricity plants located in upwind states in September 1999. We play fair in New York and do not only pursue out-of-state sources, so shortly thereafter we, with the state Department of Environmental Conservation, commenced enforcement action against eight coal-fired plants in New York as well. Shortly after we filed our notices of intent, the federal Environmental Protection Agency commenced legal action against a number of coal-fired plants. A number of other northeast states joined our actions. We have now reached agreements in principle with two companies -- the Virginia Electric Power Company and Cinergy Corporation. In addition, we are in active discussions with the owners of several of the New York coal-fired plants to resolve their liability.

The aim of the Clean Air Act litigation brought by New York, other northeast states, the federal EPA and various environmental organizations is to address these harms by going to their source. Whereas in the past citizens and states had looked entirely to the federal government to address interstate pollution, we decided to confront the power plants themselves. While some have argued that the interpretation of the New Source Review (NSR) provisions in these lawsuits was new, in fact the interpretation stays entirely within EPA interpretations and court rulings over a decade old. We rely on EPA memoranda and court decisions from the previous Reagan and Bush administrations. There was nothing new about the interpretation. What was new was only the fact that we decided to investigate and identify violations.

Congress created the NSR provisions (including the related Prevention of Significant Deterioration (PSD) provisions) to insure that increased pollution from the construction of new emissions sources or the modification of existing emission sources be minimized, and to ensure that construction activities would be consistent with air quality planning requirements. Generally, the NSR program requires such sources to obtain permits from the permitting authority before the sources undertake construction projects if those projects will result in an increase in pollutants above a de minimis amount. In addition, the NSR regulations usually require that sources install state-of-the-art controls to limit or eliminate pollution. Congress required and fully expected that those older existing sources would either incorporate the required controls as they underwent "modifications," or would instead be allowed to "die" and be replaced with new, state-of-the-art units that fully complied with pollution control requirements.

The Clean Air Act defines "modification" as a physical change or change in the method of operation that increases the amount of an air pollutant emitted by the source. 42 U.S.C. ' 7411(a). Courts for many years have interpreted the Clean Air Act term "modification" broadly. Alabama Power Co. v. Costle, 636 F.2d 323, 400 (D.C. Cir. 1979) (the term `modification' is nowhere limited to physical changes exceeding a certain magnitude"); Wisconsin Electric Power Co. v. Reilly, 893 F.2d 901, 905 (7th Cir. 1990) ("WEPCO") ("[e]ven at first blush, the potential reach of these modification provisions is apparent: the most trivial activities - the replacement of leaky pipes, for example -- may trigger the modification provisions if the change results in an increase in the emissions of a facility.") The WEPCO court noted that Congress did not intend to provide "indefinite immunity [to grandfathered facilities] from the provisions of [the Clean Air Act]," id. at 909, and that "courts considering the modification provisions of [the Clean Air Act] have assumed that >any physical change' means precisely that." Id. at 908 (emphasis added) (citations omitted). EPA recognized, however, that the sweeping statutory definition of "modification" to include "any physical change" could have nonsensical results if carried to an extreme ("the definition of physical or operational change in Section 111(a)(4) could, standing alone, encompass the most mundane activities at an industrial facility (even the repair or replacement of a single leaky pipe, or a change in the way that pipe is utilized)"). 57 Fed. Reg. 32,314, 32,316 (July 21, 1992). Thus, since 1977, federal regulations have exempted routine maintenance, repair, and replacement from the definition of modification. 40 C.F.R. ' 52.21(b)(2)(iii). EPA historically has analyzed and applied the "routine maintenance" exemption to modification by using a common sense test that assesses four primary factors - (1) the nature and extent; (2) purpose; (3) frequency; and (4) cost of the proposed work. See, e.g., Memorandum from Don R. Clay, EPA Acting Assistant Administrator for Air and Radiation, to David A. Kee, Air and Radiation Division, EPA Region V (Sept. 9, 1988). Our cases follow these standards.

The NSR provisions also apply only if there is a significant increase in pollution due to the modification. Methods for calculating emissions increases generally compare the emissions prior to the modification and those after the modification. For post-modification emissions, however, a company undergoing NSR review at the time of the modification would have to project the emissions after the modification in its permit application. While the analysis of emissions is still being refined in the cases under litigation as documents are being made available by the defendants, in the Tennessee Valley Authority case, the Environmental Appeals Board found that emissions did increase under methods favorable to industry at all units at which violations were alleged.

As noted above, the standards for these cases derive from EPA memoranda and litigation dating from the Reagan and Bush administrations. They are not new interpretations. They do not address true "routine" maintenance; indeed, industry documents indicate that industry did not consider the modifications at issue to be routine maintenance. Rather, the modifications were large-scale capital projects that required significant advance planning. They were intended to address problems that routine repair or replacement had been unable to address. Nor were the upgrades modest; in most cases they cost millions of dollars. By contrast, activities considered by industry to be "routine" include more mundane actions such as the day-to-day repairs of leaky or broken pipes. Industry documents further show that industry officials were aware of the potential applicability of the NSR provisions to their power plant life-extension projects.

Clean Air Act Litigation Settlements

In discussing resolution of these lawsuits with the companies, we and EPA recognized the need to ensure the nation's energy supply. We gave the companies significant time to install the needed controls. These lawsuits will have absolutely no detrimental effect on our energy supply. We ensured that the upgrades could be implemented consistent with the operating and financial needs and abilities of the companies. Indeed, we expect that pursuant to the settlements, some facilities will be repowered and expanded. Moreover, these settlements will provide the regulatory certainty that companies need to invest. By providing clear guidelines, these settlements delineate a path through the environmental laws by allowing the companies to invest in their coal plants so long as they invest in state-of-the-art controls. The result is to improve our energy diversity, increase our energy supply, and improve the environment, a win-win result.

While the actual agreements in principle that we have reached are still confidential -- we are working to finalize the language of the consent orders now -- the outline of those settlements is public. Those outlines provide sufficient detail to see that, far from harming our energy supply, the settlements will enhance it.

In the first case, with Virginia Electric Power Company (VEPCO), we had alleged that VEPCO made modifications to its plant that significantly increased emissions, without installing concomitant pollution controls. For instance, VEPCO rebuilt the boilers at several plants, changing their design, and expanded the coal yard at its Mount Storm plant by 50 percent. (VEPCO also doubled the height of the smokestack at Mount Storm to 730 feet to ensure that air pollution from the facility did not fall on nearby communities. The result is that much of the plant's emissions now drift hundreds of miles on prevailing winds to distant states such as New York.)

The agreement in principle covers eight plants in Virginia and West Virginia (Mount Storm, at Mount Storm Lake, West Virginia; Chesterfield, in Chester, Virginia; Bremo, in Bremo Bluff, Virginia; Chesapeake Energy Center, in Chesapeake, Virginia; Clover, in Clover, Virginia; North Branch, in Bayard, West Virginia; Possum Point, in Dumfries, Virginia; and Yorktown, in Yorktown, Virginia.). In the agreement in principle, VEPCO agreed to cut pollution of sulfur dioxide and nitrogen oxides by approximately 70 percent over the next 12 years. (Of course, the primary beneficiaries of these pollution reductions will be people in Virginia and West Virginia near the plants.) Capacity, however, will not be decreased. It will install pollution controls at its largest units on a schedule consistent with its rate restrictions. The consent order will also provide for VEPCO's funding of certain energy efficiency and renewable energy projects in New York and several other states. And, finally, the settlement will provide VEPCO with clear guidelines for changes and upgrades acceptable to EPA that can be made in the future.

The settlement with Cinergy Corporation addresses 10 power plants (Cayuga, Cayuga, IN; Gallagher, New Albany, IN; Wabash River, West Terre Haute, IN; Beckjord, New Richmond, OH; Gibson, Owensville, IN; Miami Fort, North Bend, OH; Zimmer, Moscow, OH; East Bend, Rabbit Hash, KY; Edwardsport, Edwardsport, IN; and Noblesville, Noblesville, IN). This agreement in principle requires substantial pollution reductions and allows Cinergy to use new technology if appropriate so long as the new technology meets certain emission limitations. Like the VEPCO settlement, this agreement should not result in a decrease in Cinergy's generating capacity; in fact, with the repowering of several units, Cinergy's generating capacity should increase. The consent order will also provide for the funding of energy efficiency and renewable energy efforts.

There is no question, finally, that these companies can easily afford the settlements. As others who have appeared before you have testified, coal is by far the least expensive fuel now. These power plants, being very old, have been fully depreciated. The fixed and variable costs of running them are exceedingly low. Yet, while their costs are remaining low, the price consumers are paying for electricity is increasing dramatically. This revenue increase is a windfall for these old coal-fired plants. Our estimates are that rates will have to increase very little, or not at all, for the companies to afford the clean air pollution upgrades the settlements will require. Certainly, the rates will remain well below rates in the Northeast. In short, these lawsuits, while they will cost some money, in no way jeopardize either the financial health of the companies or the burdens on the ratepayers.

The VEPCO and Cinergy settlements are not legal straight-jackets as some have unfairly portrayed them. In the enforcement context, we, along with officials from EPA and the Department of Justice, can weigh and have weighed numerous issues that may be unique to each company. We have allowed technological flexibility. We have recognized financial constraints and provided ample time for planning and implementation. These lawsuits and settlements represent an extraordinary accommodation of clean air and energy needs. I find it nothing short of amazing that efforts to enforce the law -- really no different from the myriad of other law enforcement efforts my office and many other prosecutors undertake ranging from drug crimes to fraud investigations -- have been so criticized. Rather, they should be applauded.

There has been some discussion before this subcommittee of the PowerSpan technology that is being developed by several companies, including some we have sued. We are meeting next week with PowerSpan representatives to investigate and understand this technology better. We have also been discussing other innovative technology with the private sector and with EPA. We are open to and enthusiastic about new technologies, particularly ones that may control mercury or carbon dioxide emissions. It would be a big mistake, and completely unjustified, to think that we are locked into old technologies. At the moment, of course, this PowerSpan technology appears promising, but not proven on a large scale; it is not yet as good as others for most pollutants. We intend to keep following its development and give it, and the power companies that will use it, appropriate opportunities for deployment. In sum, these lawsuits are achieving major environmental improvements while helping, and not in any way harming, our energy security. For that reason, I emphatically disagree -- respectfully but vehemently -- with the request by Senators Inhofe and Breaux that these cases be suspended. Regardless of what the administration decides, we intend to pursue our cases both within and outside of New York.

Economic Value of Clean Air

Some have taken issue with the value of clean air, suggesting that it is merely a matter of convenience and not a matter of dollars and cents. Of course, anyone who has seen a child suffering an asthma attack, an older person struggling for breath on a smoggy day, or an adult friend wheezing, would recognize the absurdity of drawing this distinction. But lest there be any doubt, studies demonstrate that clean air is good for the American economy. A study done for the federal government found that the net benefits of the Clean Air Act over the last 20 years, ranging from increased crop production to decreased health care costs, totaled over 22 trillion dollars. Other studies demonstrate the same: clean air is good for the American economy.

Moreover, the claim that the cost of clean air requirements has made new power plant construction unprofitable has little if any basis. Few power plants were sited during the early 1990s because there was ample supply. Once it appeared that new supply was needed, new proposals appeared very quickly. In New York, we have dozens of proposed new power plants. The regulations that apply to them are clearly within the financial plans of the many companies proposing such plants.

As others have noted, there will be an extraordinary market for clean technologies over the next decade. You were told it would be a 25 trillion dollar market. New York, like its sister states, wants, deserves, and should have a substantial share of that market. Yet if we do not insist on clean air ourselves, we will not find the clean air technology developed here. By insisting on clean air, we continue to provide opportunities for our thriving business community.

Finally, it is important to note that, while clean air has tremendous value, so does dirty air. Dirty air consists of free waste disposal for a few privileged companies. Any normal company, particularly power companies in the deregulated and highly competitive market, looks for ways to reduce costs. Free waste disposal, if allowed, is one such method. Because of the significant cost advantage such unloading of costs can provide, we cannot rely on a purely voluntary system to cut emissions. A voluntary approach will not work any better in the electric power market than it does or would in other waste discharge programs. We have seen repeatedly, that absent fair but strong limits, pollution will be discharged into the public's air or water or land in order to cut costs. We need a strong air pollution system, and we need it to be enforced.

The Importance of the State Role

While air pollution is a classic example of a problem that requires a federal presence, it is critical not to underestimate the role of states in confronting this inherently interstate problem. States have been actively involved in the litigation concerning many of EPA's recent air quality rules. Many northeastern states have joined in New York's lawsuits against the Midwestern power plants. Let me remind you that New York, for example, filed its lawsuit against VEPCO before the EPA filed any lawsuit. This litigation, and its success, owes a great deal to state enforcement efforts.

Indeed, the structure of environmental laws gives states a large and important role. As you know, it is the states that develop the State Implementation Plans that govern how we will actually achieve the ambient air quality standards set by EPA. The northeast states have gone beyond those minimum actions and have taken many other measures on their own to reduce air pollution, such as imposing stricter controls on in-state sources. I urge you to work in partnership with the states -- both the state environmental agencies and the state attorney general offices -- when considering the issues before you.

I also urge you to support and encourage strong federal enforcement as part of a true federal-state partnership. There are several reasons why this is important. First, federal enforcement levels the playing field in two distinct areas: (1) between companies that willingly comply with environmental and other rules and those that do not, and (2) between states that aggressively enforce the law within their own borders and those that do not. While at times states can bring enforcement actions concerning out-of-state sources, such as we did with the power plants, that is unusual. A state doing a good job protecting the health of its citizens should not be at a disadvantage with respect to less conscientious states. Second, federal enforcement provides a solid back-drop to state enforcement, playing a role in unusually difficult or troublesome cases. Finally, federal enforcement often brings with it the tremendous technical resources and expertise of the federal agencies that oversee the entire program. In the case of clean air, EPA's expertise and experience is extraordinary and very helpful both to us in the states and, I believe, the regulated industries. Reducing federal enforcement does not create a vacuum that states fill; rather it hinders state enforcement. In contrast, strong federal enforcement actually enhances the state role.

Steps to a Sound and Diverse Energy Supply

Senator Voinovich asked about how to harmonize our environmental and energy policies. We harmonize these two critical needs by addressing not only how much power we have available, but how that power is generated. I discuss this at length in my report. We can achieve a sustainable energy portfolio by enacting policies that promote clean distributed generation, renewable power, and energy efficiency and, at the same time, ensuring that the necessary new supply can be brought on line promptly. If we were to improve efficiency by an achievable 10B20 percent, and increase renewable energy to provide 10-20 percent or more of our nation's energy needs, which is also quite feasible, we would largely, if not completely, resolve the current energy challenge. Moreover, we probably, just by those measures, would go most of the way towards meeting even the most aggressive climate change goals. And finally, we would reduce our dependence on foreign fossil fuels.

While not all aspects of my recent report detailing how New York can achieve both its energy and its environmental goals are necessarily relevant to federal policy making, I suggest that certain of my New York recommendations offer a sound strategy for the nation.

First, we must embark on an immediate effort to reduce dramatically demand through conservation and efficiency. We are confident that we can achieve significant gains in energy efficiency even in New York which ranks second among the states for the most efficient use of energy today. (New York ranks second in large part due to the efficiencies of the mass transportation that is so extensive, particularly in the New York City region. This energy efficiency provides yet another reason, in addition to air and water quality and traffic congestion reasons, for significant federal support for mass transit.) Specific measures include:

$ immediate adoption of the Department of Energy efficiency standards for residential air conditioners and heat pumps, residential clothes washers, residential water heaters, and commercial heating and cooling equipment; $ government funding for efficiency improvements, such as through programs like New York's System Benefit Charge, a small non-bypassable charge added to the electricity rates that, our experience proves, more than pays for itself within a couple a years in reduced consumer bills; $ utility portfolio mandates, modeled after the renewable portfolio standards in effect in many states, to bring utilities (particularly those in deregulated states where there are no longer rate hearings and conditions on rate increases) back into the efficiency effort; $ pricing policies to encourage flexible demand (such as time-of-day or day-night rates that encourage people to use power at off-peak times) and policies to ensure that people have a direct price signal for their energy use (such as conversion of master metered multiple unit dwellings to individual meters); $ changing regulations so retailers of electricity are rewarded for reductions in demand; $ state sales tax credits for efficient appliances and vehicles; and $ measures to provide consumers with better information about their energy choices (such as the excellent Energy Star program). $

The federal government should increase, not decrease as has been proposed by the new administration, its spending on these measures.

Second, we must increase the supply of clean electricity. In New York, we have created a new siting board to review applications for new power plants. In my report, I suggest that the existing process is too slow and can be improved by giving earlier review to those applications that, because of a variety of factors, deserve a preference and through other procedural changes. While such siting issues are generally left to the states, the federal government can assist in bringing clean new sources of supply on line by promptly passing the Clean Power Act, S. 556, and other measures to establish the certainty necessary for private investment. The federal government's role must not be, as some recommend, to suspend environmental rules; that will only lead to additional years of uncertainty. In addition, as was mentioned at this subcommittee's first hearing on March 21,2001, the federal government can help by stopping the rhetoric about environmental requirements interfering with our energy supply. We have spent years trying to get beyond the simplistic "environment versus economy" argument; it has been rebutted by innumerable studies. When the federal government revives such myths, it makes people believe that new power plants will poison them. So they resist them in every available forum. If instead, the federal government reassures Americans that they can have a clean environment and a secure energy supply, then the siting process everywhere will be easier and faster.

Third, we must improve the transmission system so that available power can reach the places where it is needed. For example, in New York, we have an ample wind resource upstate while our greatest demand is in New York City. Improvements to the transmission system should allow us to take advantage of clean supply opportunities wherever located.

Fourth, we need to increase clean distributed energy sources. Small scale sources, such as fuel cells, wind generators, small-scale hydro, solar cells and cogeneration facilities (but not including uncontrolled diesel generators), can provide significant new supply while avoiding any incremental strain on the distribution system and without creating significant emissions.

Finally, we need an all-out effort to expand renewable power sources, especially wind and solar. Recent studies demonstrate that even in northern states such as New York, solar power -- which is best generated on hot summer days -- can already be cost-effective in reducing peak electricity demand -- which also comes on hot summer days. We also have significant wind resources -- enough to make a significant contribution to our future needs if properly distributed. We urge both research efforts and the enactment of a renewable portfolio standard that would create a market for renewable energy facilities.

I believe that many of these issues are addressed in the "Comprehensive and Balanced Energy Policy act of 2001" which is now being considered. I urge your careful attention to these recommendations.

Oil and Gas Issues

The second of today's panels will focus on oil and gas issues. Many of the clean air questions there are similar to those raised by the electric utility sector. Indeed, the clean air litigation brought by EPA on refiners is based on the same NSR provisions of the Clean Air Act. I suggest that the explanation I gave above as to why my clean air litigation is sound and proper applies to those refinery cases as well.

More broadly, the oil and gas sector again demonstrates that careful attention to environmental concerns can enhance, and does not harm, our energy future. EPA's recently promulgated diesel fuel rule, which has been challenged by certain industries and which my office will help defend, is a good example. This rule, on its own, will dramatically improve urban air quality since diesel exhaust is one of the largest pollution sources in urban areas. In addition, the use of low-sulfur fuel allows the use of traps and other devices to reduce particulate pollution. These traps could lead to significant reductions in PM-2.5, the finer particles that can lodge in the lung, since diesel exhaust is composed of 90 percent PM 2.5 and, according to a California study, contains numerous carcinogenic compounds.

Another issue of great importance in this area is methyl tertiary-butyl ether (MTBE). Many drinking water wells in New York, particularly in Long Island, have been found to be contaminated by MTBE. The costs of remediating such contamination are usually significantly greater than the costs associated with uncontaminated petroleum spills. In part to address this concern, New York has passed a law that will ban MTBE in 2004. This law, however, has been challenged by MTBE manufacturers on federal preemption grounds. Federal action to allow the elimination of MTBE would be welcome.

Conclusion

In sum, the Clean Air Act, as well as other environmental regulations, should be viewed as helping, not hindering, a sound energy policy. The American people will not accept energy production that poisons their air and their water any more than they will accept blackouts. Indeed, it is a false dichotomy to suggest that people must choose one or the other. An environmentally sound energy policy is the only sustainable future. Fortunately, it is achievable if we demonstrate leadership and foresight.

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