I want to share with you Michigan's disappointment with the Environmental Protection Agency's inflexible, unworkable, and scientifically flawed approach toward reducing ozone transport in a rule that is known as the "NOx SIP Call." Under this approach, EPA is demanding that Michigan (as well as 21 other states and the District of Columbia) adopt regulations to drastically reduce the emissions of oxides of nitrogen from utilities and other major industries in our state. According to EPA, these reductions are necessary in the Midwest and Southeast, in order to reduce concentrations of ground level ozone in the Northeast.
Until recently, these regulations were to be in place by September of this year. Fortunately, this requirement has been temporarily "stayed" by the U.S. Court of Appeals, pending further review by the Court. We are hopeful that the Court will ultimately agree that the EPA demand is not justified.
It has long been our contention, indeed it was Michigan that filed suit against the EPA challenging the NOx controls, that administrative convenience and not sound policy served as the justification for the EPA NOx control plan. We believe, along with adopting a rule which has no scientific justification, the Agency has greatly exceeded its authority under the Clean Air Act to impose such requirements on states.
In addition to requiring states to adopt unnecessary NOx regulations, EPA has taken the unprecedented step of also developing a federal implementation plan (or "FIP") that would impose these same extreme controls in our states. EPA has also worked in concert with states in the Northeast in attempting to use section 126 of the Clean Air Act to impose these controls at the federal level. These actions include petitions by several states in the Northeast seeking these federal regulations. In what we consider to be a breach of regulatory ethics, EPA has stepped outside its assigned role of objective decision-making, and instead has facilitated setting state against state in an unnecessary finger pointing battle. Unfortunately, this has resulted in costly lawsuits and a serious loss of credibility to the Agency.
Michigan, concerned with the lack of justification for the drastic program being proposed by EPA, has analyzed our state's contribution to the ozone problems in the Northeast states. The results of our analysis showed unequivocally that the EPA's methodology for determining the culpability of states for significant ozone transport was scientifically flawed. The analysis showed conclusively that imposition of extensive controls in Michigan would have very little benefit on northeastern nonattainment areas.
Our analysis is also consistent with the extensive study that was completed by the Ozone Transport Assessment Group (OTAG), and which EPA falsely claims as justification for their rulemaking. In fact, the OTAG analysis shows that by far the largest contributors to ozone nonattainment in the northeast are the Northeast states themselves. Some Northeastern states would actually contribute more to their neighbors' ozone levels after imposing EPA's controls than some Midwestern and Southern states contributed before imposing controls.
OTAG also recognized that additional analysis was necessary and called for the states to be given time to conduct additional "subregional" modeling. OTAG further recommended that a range of controls for the utility industry be considered, depending upon the results of the additional modeling, and the needs of the particular state and region. The EPA has effectively disregarded these recommendations by not allowing time for the additional modeling to be completed and by demanding an across the board level of control at the most stringent level possible with no variation between the states.
The extreme level of control demanded by EPA would impose billions of dollars of costs on sources, which are primarily power producing facilities, in a very short time period. This would threaten the reliability of the electric power supply system in the entire Midwest. In Michigan, this extreme level of control is simply not necessary to achieve air quality objectives.
I would also like to share with you the Michigan plan for improving air quality and the sound scientific basis upon which our proposal was developed. Michigan, along with several other states in the Midwest and Southeast, developed an alternative proposal for significant reduction of NOx emissions in our states. This plan would provide for a 65% reduction in NOx emissions from utilities (instead of the 85% sought by EPA), and similar reductions from other major industrial sources of NOx. The reductions at utilities will be accomplished in two phases, with substantial reductions by 2002, and final reductions by 2004.
Michigan is also providing flexibility to the affected sources in Michigan, by allowing one facility to trade emission reduction credits with another. We are doing so in accordance with an innovative and comprehensive emission-trading program that Michigan developed several years ago. The Michigan trading program is an open and voluntary system, as opposed to the closed and restrictive trading program developed by EPA. In addition, our system avoids the unnecessary restrictions on growth and economic development that are hallmarks of the EPA trading program.
In developing our proposal, Michigan also evaluated whether air emissions from sources in Michigan are having a "significant" impact on air quality in states that are downwind of us. We also analyzed the air quality improvement in downwind states that might result from controls in Michigan. This technical analysis reveals that Michigan is having a very slight impact on downwind states, and supports the control levels we are adopting.
The Michigan analysis is precisely the kind of analysis that EPA has refused to conduct. Instead of basing the emission reductions on real air quality impact, EPA has attempted to define "significant contribution" in terms of the cost of controls, and erroneously concludes that virtually all ozone transport is significant.
Michigan also was a party to the lawsuit that challenged the new national ambient air quality standard for ground level ozone, claiming that the EPA failed to provide a sound scientific basis for the standard it chose. This position has also been vindicated by another recent U.S. Court of Appeals ruling. The court, in its opinion, stated that the EPA had failed to provide an "intelligible principle" for the ozone standard and ruled that EPA cannot enforce the new standard.
It was clear from a panel of scientists that reviewed the standard that there was no clear benefit to human health or the environment in setting a new standard for ozone at the levels under consideration, and that setting a new standard was a "policy call" by the EPA. Nonetheless, EPA adopted a new ozone standard that would have immediately thrown Michigan and most other states into noncompliance, despite the fact that immense improvement has been made in air quality.
Michigan is proud of the clean air accomplishments in our state, and is committed to being a good neighbor. Michigan's two largest metropolitan areas have been re- designated as attainment of the old 1-hour standard for ozone, including the Detroit area, which became the largest metropolitan area in the country to achieve this goal several years ago. More recently, on the basis of air quality data, EPA has taken action recognizing that the 1-hour standard for ozone has been met in all other areas of the state.
Despite the recent court rulings that have placed the EPA requirements on hold, Michigan is moving forward with a NOx control program consistent with the alternative we proposed to EPA last year in conjunction with several Midwestern and Southern states. We are convinced that this level of NOx control is appropriate to address any contribution we may make to ozone problems in states that are downwind of us and will not threaten the reliability of the power supply in our state. In addition, it is a program that ensures the continued economic growth of our state. We are continuing to work with our neighboring states to encourage them to also proceed with NOx emission reduction strategies that are appropriate for their respective states and the region.
We are also committed to continuing our legal challenge as EPA has steadfastly refused to consider our proposal, or to honestly consider the many technical and legal flaws we have identified in the EPA rule. It is unfortunate that states such as Michigan have had to resort to litigation because of EPA's refusal to really listen to our concerns. Fortunately, the courts have now begun to hear our concerns, and are agreeing with the compelling arguments we are making. The courts will hopefully recognize the primary role that Congress has given the states in developing air pollution control programs, rather than having these programs dictated by EPA.