O P E N I N G S T A T E M E N T

Senator George Voinovich

Hearing on S. 556

November 1, 2001

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I would like to thank you Mr. Chairman for holding this hearing today. I am glad we are moving forward with the important work of this Committee. The multi-emissions issue is important for both the environment and the larger issue of our nation's energy policy.

Mr. Chairman, as I said at our hearing on July 26th, I remain optimistic that we can reach a bipartisan compromise to continue to improve the environment and public health, reduce utility emissions, create greater regulatory certainty, and ensure that American consumers will have safe, reliable, and cost effective electricity, particularly for the least of our brothers and sisters

who are elderly and low income.

I know today's hearing is a legislative hearing on the Chairman's Bill, S. 556 but I hope we use today's hearing to explore some of the broader issues surrounding multi-emissions because I don't believe the Chairman's Bill is workable as drafted. I will outline some of my concerns with the Bill in a few minutes.

In addition to today's hearing I understand the Chairman is planning at least one more legislative hearing to receive testimony from some of the interest groups. I believe before this Committee acts, several more hearings are in order, including the hearing I previously discussed with the Chairman and Senator Lieberman on the availability of control technologies for mercury

and CO2.

I believe S. 556, as drafted, would be disastrous for our energy supply, our economy, and our competitiveness in the world marketplace. While I agree with the goals of the legislation, to reduce emissions from utilities and provide certainty in terms of emission levels; the Bill offers nothing in terms of providing regulatory flexibility. The Bill also sets emissions levels which

would lead to higher electricity prices for consumers, massive fuel switching, an overall reduction in our Gross Domestic Product of $75 billion by the year 2010, and $150 billion in 2020, and a loss of over 600,000 jobs in 2010.

These impacts would be felt the hardest in the Midwest and the Atlantic States (from Florida up to New York). The Midwest in particular would be hit hard because it is the manufacturing base of our country.

[CHART 1] As you can see by this chart, 23% of our nation's GSP for manufacturing is concentrated in the five states which comprise the Midwest; Ohio, Indiana, Michigan, Illinois, and Wisconsin.

One of the major reasons manufacturing is centered in the Midwest is the availability of reasonably priced and reliable energy and energy sources. This region, and its border states of West Virginia, Pennsylvania, Virginia, and Kentucky are the source of low cost and abundant coal and because of the iron ore in the Great Lakes. This region is the heart of U.S. manufacturing not only because of it's low cost energy but also because of its central location for

transportation.

This chart contrasts the Midwest data with the six states of New England. For years now the discussion on utility emissions has turned into a regional debate between the Northeast and the Midwest, and I have been involved in this debate since the early seventies and from my time as mayor of Cleveland when I operated a 57MW municipally owned utility, Cleveland Public Power.

I realize my colleagues in the Northeast will say that higher energy prices will impact them as well. But the truth of the matter is that the impacts on the Midwest will have a direct, negative impact on the economy of the entire nation. The Midwest represents 23% of the total U.S. manufacturing GSP (gross state product) and almost 3 million manufacturing jobs compared to New England's 5.6% of the U.S. total and 615,000 manufacturing jobs. When energy prices go up, manufacturing declines and workers are laid off.

I think we need to move past the regional differences and understand that what affects the Midwestern manufacturing base has a direct impact on our nation's economy and our competitiveness in the global marketplace.

Right now Ohio and the Midwest are in a deep recession and although it began last year, te recession accelerated when natural gas prices increased five-fold last winter. Ohio is the leading producer of polymers in this country and natural gas is used as a raw material in their production. The higher prices earlier this year took away our international competitive edge,

threatening our domestic industry.

By the way, the effect on our economy is one of the reasons Congress needs to act on developing a national energy policy. What happened last winter underscores why Congress needs to adopt a national energy policy. The Administration has acted, the House of Representatives has acted, and it is time for the Senate to act.

Over the last ten years Ohio has spent more on emissions reductions than New York, New Jersey, Massachusetts, Connecticut, Vermont, Rhode Island, Maine, New Hampshire Maryland, Delaware, and Washington D.C. combined. We reduced air toxins from approximately 381 million pounds in 1987 to 144 million pounds in 1996. While I was Governor I convinced AEP to install scrubbers costing $616 million dollars to reduce SO2 emissions on the Gavin facility, the largest coal-fired power plant in the country. When I began my term as Governor, eight of our cities were in nonattainment for ozone. Currently, all 88 Ohio countries are in

attainment for the national Ambient Air Standards. No single state has done more to improve air quality in the last ten years than Ohio.

At the same time, our emissions are higher than other states, because we produce more manufactured goods than most other states. [CHART 2] As you can see by this chart, while Ohio produces 4.6% of the total U.S. electricity generation, we also employ 5.8% of the nation's manufacturing workforce (733,610 jobs). We also produce 6.2% of the nation's manufacturing GSP (gross state product).

[CHART 3] When you compare Ohio's manufacturing production with the New England states, as you can see on this chart, Ohio's GSP for manufacturing is higher than all six of the New England States combined. (93.4 billion for Ohio, compared to 83.8 billion for all of New England.)

Mr. Chairman, I use these charts only to point out that while our electricity generation is higher, we have also spent more on emissions reductions; and while our electricity generation is also higher, its because we produce more manufactured goods. Any legislation which jeopardizes our ability to produce manufactured goods will jeopardize our nation's economy.

I am afraid Mr. Chairman, that your proposal as currently drafted will jeopardize our nation's economy. I will set aside the CO2 issue for a moment (which on its own would wreck the economy) and just concentrate on the other three pollutants as covered in your Bill.

[CHART 4] This chart shows the expected costs of four different proposals addressing NOx, SO2, and mercury, according to EIA (Energy Information Administration). The first three scenarios show 50%, 65%, and 75% reductions in all three pollutants by 2012. This is contrasted with the reductions in S.556, which are called for by 2007. As you can see for mercury alone, the costs increase five-fold, from $90,000 per pound to almost $500,000 per pound of reduction.

Although S. 556 calls for a 75% reduction level for NOx, the cost under S.556 is $1,000 more per ton because of the change in the compliance dates, from 2007 to 2012. The SO2 numbers are lower because the mercury reductions drive the technology for SO2.

According to analysis provided to me from the Edison Electric Institute, this Bill would decrease Ohio's Gross State Product by $3 billion dollars bt 2010 and $6 billion dollars by 2020. Overall Ohio would lose over 25,000 jobs by 2010 and over 37,000 jobs by 2020.

Ohio families would pay $494 million dollars more for electricity by 2010 and over $1.5 billion dollars for electricity by 2020.

Nationwide, the Jeffords Bill would decrease the national Gross Domestic Product by $75 billion in 2010 and $150 billion in 2020. The country will lose over 600,000 jobs in 2010 and 0ver 900,000 jobs in 2020. Earnings would decline by $300 - $550 dollars per household.

This chart comparing the different plans, and the impacts on Ohio convinces me that we need to spend more time on this issue as a Committee to better understand what the different reduction levels would mean for cost, fuel switching, and the effect on the economy. As well as what technologies are feasible and available for the reductions we need.

The Bill as drafted would be a disaster on the economy of Ohio and our nation's manufacturing industries. This Bill will be like a tornado sweeping across the country, leaving in its wake ruined manufacturing facilities.

I don't want to leave any doubt in anyone's mind, I do support a 3-pollutant strategy, and I am open to a voluntary CO2 program, so long as it is cost-effective, makes real reductions in pollution, will not cause massive fuel switching away from coal, and will not harm our economy. However, I can not support the reduction levels or dates that are found in S.556 as drafted.

Mr. Chairman, I hope this is just the beginning of the process in this Committee and that we will have true bipartisan negotiations to reach a compromise Bill that we all can support. I look forward to hearing from the witnesses.