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October 6, 1998

Mr. Chairman and Members of the Subcommittee, I am pleased to have the opportunity to testify on S. 1097, the "Acid Deposition Control Act." My testimony will focus on several major themes pertaining to the impacts of acid deposition and its precursor emissions sulfur dioxide (SO2) and nitrogen oxides (NOx), the progress and cost-effectiveness of current efforts to reduce these emissions, and our reactions to the provisions in S.1097. This hearing provides an opportunity to examine where we are, what we have learned since the 1990 Clean Air Act Amendments, and how successful mechanisms such as those in the current Acid Rain Program may be used in future efforts to address air pollution.


In 1980, driven in particular by Senator Moynihan's interest in acid rain, Congress passed the Acid Precipitation Act. In that Act, Congress mandated a 10-year scientific, technological and economic study to examine the relationships among fossil fuel combustion, acids and other pollutants formed by emissions, and the effects on the environment and human health. The National Acid Precipitation Assessment Program (NAPAP) was established to coordinate and administer the study. NAPAP drew several significant conclusions. First, NAPAP concluded that the effects of acid deposition and its precursor emissions SO2 and NOx are broad. They include acidification of lakes and streams, damage to certain high elevation forests, depletion of essential forest soil nutrients, damage to materials, particularly those of historical and cultural significance, and visibility impairment and human health effects associated with ambient sulfates and nitrates. Second, the source-receptor research performed in the 1980s recognized and documented long-range transport of air pollution and revolutionized clean air policy regarding regional air pollution issues. It became apparent that a broad regional approach would be needed to address a broad regional air pollution problem. Third, the emissions inventories developed under NAPAP revealed critical information regarding the source of acid rain forming emissions. Two-thirds of the SO2 emissions and one-third of the NOx came from electric power generation. The wealth of data and analyses developed under NAPAP provided the underpinning for Title IV (Acid Deposition Control) of the Clean Air Act Amendments of 1990. At that time, Congress also reauthorized NAPAP to periodically report to Congress on the costs, benefits and effectiveness of Title IV.

Innovative "Cap and Trade" Design to Reduce SO2

In creating Title IV and establishing the Acid Rain Program, Congress drove environmental protection in a new direction, away from traditional command and control regulation. First, to address the problem of acid rain, Congress focused on reducing the SO2 and NOx emissions that cause acid deposition rather than relying on regionally variable deposition standards and state-by-state implementation plans. Second, Congress translated its 10 million ton SO2 reduction goal into a nationwide cap on emissions from electric generating sources and allowed the industry 20 years to achieve it. Third, Congress provided EPA with a new tool to achieve this reduction -- an innovative market-based allowance trading program, where one allowance is a limited authorization to emit one ton of SO2, allowances are allocated to sources based on performance standards, and they can be freely traded.

This "cap and trade" approach allowed industry unprecedented flexibility in how to achieve the needed emission reductions. They could install pollution control equipment such as "scrubbers", switch fuel, conserve energy, rely more on renewables, trade SO2 allowances, or any combination of these. In return for this flexibility, sources were to provide a full accounting of their emissions through continuous monitoring and reporting, and there would be severe consequences for failing to hold sufficient allowances to cover one's emissions. The objective was for sources to find the most cost-effective means for limiting SO2 emissions and to be responsible for achieving those emissions reductions. There would be no government second guessing and lengthy permit reviews.

Progress of the Acid Rain Program - Significant Reductions at Low Costs

In 1995, the first year of compliance under the Acid Rain Program, SO2 emissions declined dramatically - by over 3 million tons - resulting in a nearly 5 million ton SO2 reduction from electric power generation from 1980 levels. Over the first 3 years of the program, emissions from Phase I units emissions were more than 30 percent below their allowable levels and sulfate deposition has been reduced by as much as 25 percent. Of particular importance is that the most significant emissions reductions occurred in the highest emitting states and regions of the country. Phase II will begin in 2000 and further emissions reductions will be required to achieve the total 10 million ton reduction in SO2 under the Program.

Cost savings have exceeded expectations. In 1990, EPA projected the cost of full implementation of the SO2 emissions reduction with trading at $4 billion per year. In 1994, GAO projected the cost to be less than $2 billion per year. The most recent estimate of annualized cost of compliance published this year by Resources for the Future is approximately $1 billion per year.

Control of NOx from coal-fired utility boilers under the Acid Rain Program began in 1996. For Phase I utility units, the average NOx emission rate declined by 42 percent (from 0.69 lb/mmBtu to 0.40 lb/mmBtu). These same units exhibited about a 35 percent reduction in tons of NOx (approximately 400,000 tons between 1990 and 1997). However, NOx emissions in 1997 increased slightly from 1996, because of greater electricity production. In 2000, NOx from electric utility boilers will be further reduced to a total reduction of over 2 million tons per year. However, without further requirements to reduce emission rates, such as those in the Agency's final ozone transport rule ("NOx SIP Call"), NOx emissions would be expected to rise with increased utilization.

The success of the cap and trade approach is being adapted for other programs. In 1996, the Ozone Transport Commission (OTC), composed of 12 northeastern states and the District of Columbia, asked EPA to help develop and administer an emissions trading program, modeled after the SO2 program, to control summer NOx emissions in the OTC region. More recently, the cap and trade approach was included as an option for states in the NOx SIP Call. When implemented, that rule will achieve significant, cost-effective summertime NOx emissions reductions in 22 states and the District of Columbia.

Environmental Trends, Modeling and Continued Concerns for Natural Resources

Environmental data are beginning to reflect improvements accompanying the downward emissions trend, but fundamental concerns regarding recovery persist. The nation's deposition monitoring networks have shown significant reductions in sulfate concentrations measured in both wet and dry forms. Results from an analysis of long-term surface water monitoring data have confirmed that acid sensitive lakes have experienced significant declines in sulfate concentrations in response to declining sulfate deposition. Surface water nitrate levels, however, have not shown significant upward or downward trends which is also consistent with trends in nitrate concentration levels in deposition.

Acid neutralizing capacity (ANC) is a measure of alkalinity or buffering ability and is most often used as a primary indicator of surface water response, or recovery. Lakes in New England have begun to show some recovery while Adirondack lakes in New York have exhibited either no trend or further acidification (decrease in ANC). Other sensitive watersheds in the southeastern U.S. (e.g., Virginia trout streams) appear to be so saturated with sulfur that they may get worse before there are signs of recovery.

In August of this year, NAPAP reported that some forest soils are beginning to "leach" sulfates or nitrates or both due to decades of exposure to high sulfur and nitrogen deposition loads. High elevation lakes in the western U.S. are also vulnerable to sulfur and nitrogen loadings. In 1995, the EPA sent to Congress its Acid Deposition Standard Feasibility Study. This study drew several conclusions: 1) The number of acidic waters would be expected to increase substantially without the SO2 and NOx emissions reductions required by the 1990 Amendments. 2) The study projected that although there is uncertainty and regional variability regarding a specific "protective threshold" the direction and magnitude of the modeled results indicate that additional reductions in both sulfur dioxide and nitrogen oxide emissions may be necessary to fully protect sensitive resources. 3) This study, as well as numerous other research studies in the peer reviewed literature, identifies nitrogen as a major contributor to both short-term (episodic) and long-term (chronic) acidification.

Recent evidence also points to atmospheric nitrogen deposition as a significant contributor to total nitrogen loading to coastal waters along the East and Gulf coasts and nutrient loading in large river basins. Excessive nitrogen levels have been found in all East and Gulf coast estuaries including for example the Narragansett Bay, Long Island Sound, the Chesapeake Bay, Albemarle and Pamlico Bays, Tampa Bay, Galveston Bay and the "hypoxia zone" along the Gulf coast. Recent analyses of estuaries along the East and Gulf coasts have estimated the nitrogen contribution from atmospheric sources to range from 10 to 45 percent. Excessive nitrogen or nutrient over-enrichment is associated with adverse ecological effects such as eutrophication and extreme anoxic (low oxygen) conditions in some locations. These conditions have important implications for the biological communities.

Multiple Effects Associated with Sulfur Dioxide and Nitrogen Oxides Emission

Reducing SO2 and NOx provides multiple environmental and human health benefits.

.     Reduced number of acidic lakes and streams in various sensitive regions of the country (e.g., Northeastern, Mid-Atlantic, Southern Blue Ridge, Upper Midwest and high elevation Western regions) and more sensitive ecosystems will be capable of sustaining diverse aquatic life. In particular, annual reduction of NOx emissions ensures greater ecosystem protection (i.e., against acidification, eutrophication), particularly during spring when highly sensitive biological aquatic life stages (i.e., spawning) are most susceptible to acidic pulses from snowmelt and heavy rainfall.
.     Increased protection of coastal ecosystems and estuarine aquatic life due to a reduction in nitrogen deposition onto coastal waters and their larger watersheds.
.     Reduced leaching of essential soil nutrients, addressing the "saturation" of certain forested watersheds due to many years of high sulfur and nitrogen deposition, to a state in which recovery can occur.
.     Increased protection of sensitive structural materials, particularly objects of cultural and historical significance. The effects of dry acidic compounds and their reactions are now understood to cause the most deleterious loss of structural integrity.
.     Reduced ambient sulfates and nitrates with consequent reduced risks to human health.
.     Reduced ground-level ozone concentrations with consequent reduced risks to human health.
.     Reduced ambient sulfates and nitrates with consequent improvements in reducing haze that impairs scenic visibility.
Comments on S. 1097
In general, S. 1097 builds on those elements of the Clean Air Act that are working well.

.     The bill relies on the successful market-based mechanism introduced in the 1990 Amendments and applies it to both NOx and SO2. Trading allowances provides flexibility to sources and competition across compliance options, and the emissions cap ensures that the pollution reduction goals are met and maintained into the future. Contrary to early concerns over trading and the potential for "hot spots," SO2 trading has not led to significant geographical emissions shifting from one state to another.
.     The bill reduces and caps emissions of NOx. It builds upon the existing NOx reduction requirements under the acid rain program and the recent ozone transport rule. The level of summertime NOx emission reductions is similar to that under EPA's recent SIP Call; however, the NOx emissions cap is broadened to cover the entire year and the 48 contiguous states. By requiring the retirement of two allowances for every ton of NOx during the five summer months, the bill ensures greater reductions in the summer when the health impacts of ozone are of primary concern. By requiring NOx reductions year-round, the bill is consistent with the latest research on ecological protection during biologically sensitive times of the year.
.     The bill further reduces SO2 emissions from the utility sector by requiring two SO2 emissions allowances to be surrendered for each ton of SO2 emitted, thereby cutting the current cap in half. EPA prefers an approach which minimizes disruption to implementation of the current SO2 allowance system under the Acid Rain Program.
.     The bill emphasizes measurement of emissions by requiring the industrial sector to install continuous emissions monitoring systems. Continuous monitoring generated by this requirement would improve the accuracy in emissions inventories for that sector, however EPA would need to analyze the associated costs. The bill does not require emissions reductions from that sector.
.     The bill places significant emphasis on monitoring and assessment by requiring EPA to report to Congress periodically on environmental progress and to take further regulatory action if reductions are insufficient to achieve environmental objectives. This emphasis on assessment and evaluation is consistent with the Agency's current plans to maintain the capabilities to monitor progress and assess recovery. The requirement to periodically report to Congress and take action as needed, although potentially resource intensive, provides an ongoing mechanism to respond to new scientific research. The bill also recognizes, as does the Agency, areas of needed research particularly to address uncertainties associated with nitrogen deposition on sensitive watersheds and coastal waters.

In addition, the bill places importance on addressing mercury. Recent information on mercury emissions warrants further attention. Electric power plants, and specifically coal-fired powerplants are the largest source category of mercury emissions in the U.S., accounting for fully one-third of all man made mercury emissions in this country, and they are uncontrolled. EPA is currently working to obtain further data on mercury emissions from electric utility sources and additional information on cost-effective control technologies.

Overall, while the direction of the bill is consistent with EPA's views, the timing of the provisions in the bill may not be consistent with that of EPA. For example, the reduction of the SO2 allowance cap in the bill is to occur in 2003. This time frame may be disruptive to the allowance market and industry planning for compliance, leading to higher compliance costs. Additionally, since such a reduction could affect achievement of the broader range of human health as well as ecological benefits, the timing of such reductions should be considered in the context of the National Ambient Air Quality Standard (NAAQS) review for particulates and the efforts to address regional haze. The Agency anticipates completion of national particulate monitoring networks by 2000, completion of another 5-year scientific review of the NAAQS by 2002, nonattainment designations completed between 2002 to 2005 and implementation plans due between 2005 and 2008. However, it is certainly conceivable that a broad emission reduction approach using market-based mechanisms could be utilized to achieve cost-effective reductions. Another timing issue is the bill's phasing in of NOx emissions reduction in 2000 and 2003. Since the bill was first introduced in 1997, the Agency has proposed and finalized NOx emissions reductions under the NOx SIP Call and resolved litigation allowing NOx reductions under the Acid Rain Program to proceed on schedule by the year 2000. Therefore, the bill's first phase of NOx emission reductions may no longer be necessary. Furthermore, analysis of costs and benefits would be necessary to better understand the impacts of the bill before the Administration can take a position.

Integrating Pollution Control Strategies

The electric utility industry and EPA continue to discuss current and upcoming air pollution control decisions and how they might best be coordinated to achieve environmental goals at the lowest possible cost. The EPA recognizes the appropriateness of engaging in long-term integrated planning and the need to explore the use of market-based approaches such as that being used for the Acid Rain Program. The regulated community has also acknowledged that the mechanism employed by the Acid Rain Program works well. Congress has been kept informed through periodic congressional hearings in 1993, 1994 and 1996, as well as with reports by the General Accounting Office in 1994 and 1996, on the progress and costs of the Acid Rain Program. The pressing policy question is how to best respond to continued and evolving concerns for the multiple health and environmental effects of SO2, NOx, mercury and other pollutants resulting from combustion of fossil fuels. It is our understanding that this Subcommittee is planning on holding hearings in the next Congress regarding Clean Air Act reauthorization. Should the Committee hold such hearings, we believe that bills, such as S. 1097, which address regional, multi-state air pollution issues ought to be considered in those discussions.

Thank you for the opportunity to appear here today to discuss S. 1097 and our experiences implementing acid deposition control under the Clean Air Act. I would be happy to respond to any questions you may have.

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