Clean Air Act Issues in the 109th Congress

Congressional research reportNov 2, 2006

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RL33552

CRS Report for Congress

Prepared for Members and Committees of Congress

Clean Air Act Issues in the 109th Congress

Summary

The courts and the executive branch have faced major decisions on clean air issues in 2006, with

Congress playing a limited role. One focus has been the EPA Administrator’s September 21, 2006

decision regarding air quality standards for fine particles. According to EPA and the consensus of

the scientific community, current concentrations of fine particles cause tens of thousands of

premature deaths annually. The Administrator’s September 21 decision will strengthen the

standards; according to the agency, it will reduce premature mortality by 1,200 - 13,000 persons

annually. However, many are unhappy that the new standard will not be more stringent—for the

first time ever, it falls outside of a range recommended by the Clean Air Scientific Advisory

Committee (CASAC), an independent body established by the Clean Air Act to provide expert

scientific advice. On September 29, the seven members of CASAC stated that the Administrator’s

decision does not provide an adequate margin of safety requisite to protect the public health.

In 2005, Congress acted on several Clean Air Act (CAA) issues in legislation that it passed and

sent to the President. The most significant of these issues, dealing with ethanol and reformulated

gasoline (RFG), were addressed in the Energy Policy Act of 2005, H.R. 6 (P.L. 109-58). Congress

also amended the Clean Air Act in H.R. 3 (P.L. 109-59), the transportation bill that the President

signed August 10, 2005. H.R. 3 modified the requirement that state and local transportation

planners demonstrate conformity between their transportation plans and the timely achievement

of air quality standards.

Other Clean Air Act amendments have stalled. A bill that would have established a cap-and-trade

program for emissions of sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury from coalfired electric power plants (S. 131) was among the first items on the agenda of the 109th

Congress: entitled the Clear Skies Act, the bill was scheduled for markup by the Senate

Environment and Public Works Committee March 9, 2005. But the committee failed to approve it

on a 9-9 tie vote, in large part because of complaints that the bill would weaken existing Clean

Air Act requirements. Another issue in the debate was whether to cap emissions of the greenhouse

gas carbon dioxide (CO2) in addition to the other three pollutants. With Clear Skies stalled, EPA

finalized the Clean Air Interstate Rule (CAIR), which will cap emissions of SO2 and NOx from

power plants in 28 eastern states and the District of Columbia and establish a cap-and-trade

system through regulation.

A deadline for mercury regulations helped drive the Clear Skies debate: EPA faced a judicial

deadline of March 15, 2005, to promulgate standards for power plant mercury emissions. The

agency met this deadline, but the specific regulations have been widely criticized. A resolution to

“disapprove” (overturn) the regulations under the Congressional Review Act (S.J.Res. 20) was

defeated on a vote of 51-47, September 13, 2005, but the courts have yet to rule on challenges

filed by 15 states and other groups. Whether to modify other requirements of the Clean Air Act

(New Source Review, deadlines for nonattainment areas, and provisions dealing with interstate air

pollution) have also been contentious issues.

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Contents

Introduction ................................................................................................................................1

Revision of the Particulate Standards...........................................................................................1

CASAC’s Views .............................................................................................................3

Impacts of the New Standard...........................................................................................4

Implementation of the NAAQS .......................................................................................5

Issues..............................................................................................................................5

Clear Skies/Multi-Pollutant Legislation.......................................................................................5

Mercury from Power Plants.........................................................................................................9

New Source Review (NSR)....................................................................................................... 12

MTBE and Ethanol ................................................................................................................... 15

Ozone Nonattainment Area Deadlines ....................................................................................... 17

Conformity of Transportation Plans and SIPs ............................................................................ 17

Tables

Table 1. Pre-Existing, Recommended, and New NAAQS for PM2.5 .............................................2

Table 2. Estimated Costs and Benefits of EPA’s New PM2.5 Standards .........................................4

Contacts

Author Contact Information ...................................................................................................... 18

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Introduction

Despite steady improvements in air quality in many of the United States’ most polluted cities, the

goal of clean air continues to elude the nation. The most widespread problems involve ozone and

fine particles. As of March 2006, 158 million people lived in areas classified “nonattainment” for

the ozone National Ambient Air Quality Standard1; 88 million lived in areas that were

nonattainment for fine particles (PM2.5). 2

Air quality has improved substantially since the passage of the Clean Air Act in 1970: annual

emissions of the six most widespread (“criteria”) air pollutants have declined 160 million tons

(53%), despite major increases in population, motor vehicle miles traveled, and economic

activity. 3

Meanwhile, however, scientific understanding of the health effects of air pollution has caused

EPA to tighten standards for ozone and fine particles. (Fine particles, as defined by EPA, consist

of particulate matter 2.5 micrometers or less in diameter, abbreviated as PM2.5.) The agency

attributes at least 33,000 premature deaths and millions of lost work days annually to exceedances

of the PM2.5 standard. Recent research has begun to tie ozone pollution to premature mortality as

well. Thus, there is continuing pressure to tighten air quality standards: a tightening of the

standard for fine particles was finalized September 21, 2006. Ozone standards are scheduled for

review in 2007, with a final decision due by February 2008. And attention has focused on major

sources of ozone and particulate pollution, such as coal-fired power plants and mobile sources.

With this background in mind, the bulk of this report provides an overview of seven prominent air

issues of interest in the 109th Congress: revision of the particulate standards; multi-pollutant (or

Clear Skies) legislation for electric power plants; mercury from power plants; New Source

Review; the gasoline additives MTBE and ethanol; ozone nonattainment area deadlines; and the

“conformity” of transportation and clean air planning. This report (formerly an Issue Brief)

provides an overview: most of these issues are addressed at greater length in separate CRS

reports, which contain more information and detailed sources. The CRS reports are referenced in

the appropriate sections.

Revision of the Particulate Standards

On September 21, 2006, EPA Administrator Stephen Johnson signed revisions to the National

Ambient Air Quality Standards (NAAQS) for particulate matter. (The standards appeared in the

Federal Register on October 17.4) EPA reviewed 2,000 scientific studies on particulates in

developing the revision, and found associations between particulates and numerous significant

Data for ozone nonattainment areas are from the U.S. EPA “Green Book,” at http://www.epa.gov/oar/oaqps/greenbk/

gntc.html.

Data for PM2.5 nonattainment areas are also from the U.S. EPA “Green Book,” at http://www.epa.gov/oar/oaqps/

greenbk/qntc.html.

See U.S. EPA, “Air Emission Trends—Continued Progress Through 2005,” at http://www.epa.gov/airtrends/econemissions.html.

71 Federal Register 61144. EPA’s website also contains a wealth of information related to the standards, at

http://epa.gov/pm/actions.html, including an 8-page fact sheet explaining the standards and maps and charts with

background material.

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health problems, including aggravated asthma, chronic bronchitis, reduced lung function,

irregular heart beat, heart attacks, and premature death in people with heart or lung disease.

The revisions would strengthen the pre-existing standard for particulate matter 2.5 micrometers or

less in diameter (known as fine particles or PM2.5), but the standard will not be strengthened to

the degree recommended by the agency’s staff or scientific advisors. As shown in Table 1, the

new standard will cut the allowable concentration of PM2.5 in the air averaged over 24-hour

periods from 65 micrograms per cubic meter (µg/m3) to 35 µg/m3; the annual standard, currently

set at 15 µg/m3, will not be changed.

Table 1. Pre-Existing, Recommended, and New NAAQS for PM2.5

Annual Standard

24-Hour Standard

Pre-Existing Standardsa

15 µg/m3

65 µg/m3

EPA Staff Recommendation

15 µg/m3 and mid to lower end of 25-35 µg/m3

12-14 µg/m3 and mid to lower end of 30-40 µg/m3

CASAC Recommendation

13 to 14 µg/m3

30 to 35 µg/m3

Administrator’s Decision

15 µg/m3

35 µg/m3

Although these standards were promulgated in 1997, they are only now coming into effect, because of legal

challenges, the need to establish a monitoring network, and various administrative factors. For additional

information on implementation of the current standard, see CRS Report RL32431, Particulate Matter

(PM2.5): Implementation of the 1997 National Ambient Air Quality Standards (NAAQS), by (name redacted).

EPA’s professional staff and the Clean Air Scientific Advisory Committee (CASAC), a group

established by the Clean Air Act to provide independent scientific advice to the Administrator,

had recommended stronger standards. CASAC endorsed a 24-hour standard in the range of 30 to

35 µg/m3 and an annual standard in the range of 13 to 14 µg/m3. Twenty of the CASAC panel’s

22 members concurred in the recommendation.

In the Administrator’s judgment, the science underlying this recommendation was not sufficient,

relying primarily on two studies, neither of which “provide[s] a clear basis for selecting a level

lower than the current standard....”5 The Administrator agrees with CASAC that the science

shows a relationship between higher levels of PM2.5 and an array of adverse health effects, but he

believes there is too much uncertainty in the analysis to justify lowering the annual standard.6 He

also noted that EPA is undertaking substantial research to clarify which aspects of PM-related

pollution are responsible for elevated risks of mortality and morbidity, including a multi-million

dollar research program whose timeline should permit the results to inform the Agency’s next

periodic reevaluation of the PM2.5 standard, required by statute within five years. Thus, he

concluded, “...it would be wiser to consider modification of the annual standard with a fuller body

of information in hand than initiate a change in the annual standard at this time.”7

The PM NAAQS also addresses slightly larger, but still inhalable particles, in the range of 10 to

2.5 micrometers. These are referred to as thoracic coarse particles, or PM10-2.5. In its last review of

U.S. EPA, National Ambient Air Quality Standards for Particulate Matter, Proposed Rule, Preamble, 71 Federal

See discussion beginning at 71 Federal Register 61172, October 17, 2006..

71 Federal Register 2652, January 17, 2006.

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the particulate standards (in 1997), EPA had regulated these as particles 10 microns or smaller

(PM10), a category that overlapped the PM2.5 category. Challenged in the D.C. Circuit Court of

Appeals, the PM10 standard was remanded to EPA, the court having concluded that PM10 is a

“poorly matched indicator” for thoracic coarse particles, because it includes the smaller PM2.5

category as well as the larger particles. In response, earlier this year, EPA proposed a 24-hour

standard for PM10-2.5. The standard would have been set at a level of 70 µg/m3, compared to the

current 24-hour PM10 standard of 150 µg/m3. The final standards signed by the Administrator

September 21 reversed course, leaving in place the current form of the standard (PM10) and the

current level (150 µg/m3). The only change to the PM10 standard was revocation of its annual

component. The agency argues that it has provided more thorough reasoning in support of the use

of PM10 as its coarse particle indicator, and believes that its explanation will satisfy the court.

CASAC’s Views

The Administrator’s decisions represent the first time in CASAC’s nearly 30-year history that the

promulgated standards fall outside of the range of the scientific panel’s recommendations. In a

letter dated September 29, the 7 members of CASAC objected to the Administrator’s actions,

both as regards PM10 and PM2.5. With regard to PM2.5, the letter stated: “CASAC is concerned

that EPA did not accept our finding that the annual PM2.5 standard was not protective of human

health and did not follow our recommendation for a change in that standard.”8 The letter noted

that “there is clear and convincing scientific evidence that significant adverse human-health

effects occur in response to short-term and chronic particulate matter exposures at and below 15

µg/m3,” and noted that 20 of the 22 Particulate Matter Review Panel members, including all seven

members of the statutory committee, were in “complete agreement” regarding the recommended

reduction. “It is the CASAC’s consensus scientific opinion that the decision to retain without

change the annual PM2.5 standard does not provide an ‘adequate margin of safety ... requisite to

protect the public health’ (as required by the Clean Air Act) ....”9

With regard to PM10, the letter stated that CASAC was “completely surprised” at the decision to

revert to the use of PM10 as the indicator for coarse particles, noting that the option of retaining

the existing daily PM10 standard was not discussed during the advisory process and that CASAC

views this decision as “highly problematic.”

The Administrator is not required by statute to follow CASAC’s recommendations; the Act (in

Section 307(d)(3)) requires only that the Administrator set forth any pertinent findings,

recommendations, and comments by CASAC and the National Academy of Sciences, and, if his

proposal differs in an important respect from any of their recommendations, provide an

explanation of the reasons for such differences. Courts, in reviewing EPA regulations, also

generally defer to the Administrator’s judgment on scientific matters, focusing more on issues of

procedure, jurisdiction, and standing. Nevertheless, CASAC’s detailed objections to the

Administrator’s decisions and its description of the process as having failed to meet statutory and

procedural requirements could play a role if the standards are challenged in court.

Letter of Rogene Henderson et al. to Hon. Stephen L. Johnson, EPA Administrator, September 29, 2006, available at

http://www.epa.gov/sab/pdf/casac-ltr-06-003.pdf.

Ibid. Italics in original.

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Impacts of the New Standard

EPA is prohibited from taking cost into account in setting NAAQS, but in order to comply with

an Executive Order, the agency has produced a Regulatory Impact Analysis (RIA) analyzing in

detail the costs and benefits of the new PM standards.10 The agency estimates that compliance

with the new PM2.5 standard will prevent 1,200 to 13,000 premature deaths annually, as well as

substantial numbers of hospital admissions and missed work or school days due to illness.11

Critics of the rule argue that as many as 30,000 premature deaths could be avoided annually if the

Administrator had chosen the more stringent standards endorsed by CASAC.12 The higher

estimate is based on an “Expert Elicitation” conducted for EPA and released on the same day the

Administrator signed the new NAAQS.13

Table 2. Estimated Costs and Benefits of EPA’s New PM2.5 Standards

($ billion)

Basis of Benefit Estimate

Cost

Benefits

American Cancer Society Study

$5.4

$15 - $17

EPA Expert Elicitation

$5.4

$8 - $76

Source: EPA Regulatory Impact Analysis

The agency’s RIA estimates the cost of meeting the new standards at $5.4 billion annually in

2020, and provides a range of benefit estimates (from $8 billion to $76 billion annually,

depending on the number of avoided deaths, the choice of discount rate, and other factors). A

more stringent alternative (reducing the annual standard to 14 µg/m3) would increase the cost by

about 50%, to $7.9 billion annually, according to the agency, but would nearly double the

estimated benefits.14 Thus, the benefit-cost ratio would be more favorable, according to the

agency’s analysis, had the Administrator chosen the more stringent standard.

Using the most recent available monitoring data, the agency identified 141 counties where air

quality is worse than allowed under the new standards. Observed on a map, these areas can seem

small compared to the approximately 3,000 counties in the United States, but two factors make

the impact of the standards far larger. First, the number of counties where emissions will need to

be controlled may be 2 or 3 times the number of those exceeding the standard, since

“nonattainment areas” include both counties where pollutant concentrations exceed the standard,

and those that contribute to exceedance of the standard in adjoining counties. Entire metropolitan

http://epa.gov/pm/actions.html.

See “Regulatory Impact Analysis of EPA’s Final Revisions to the National Ambient Air Quality Standards for

Particle Pollution (Particulate Matter),” Fact Sheet, p. 2, at Ibid. The agency actually produced three sets of benefit

numbers, based on three different studies, and different agency documents provide varying estimates. The study on

which the agency seems to have placed the greatest emphasis, a study done for the American Cancer Society, was used

to estimate that 2,500 premature deaths would be avoided. The other two studies would have produced higher benefit

numbers. The Harvard Six-City Study, for example, was used to estimate a reduction of 5,700 premature deaths

annually, and an expert elicitation produced a mean estimate of 7,000 premature deaths reduced.

“Stronger Soot Rule Could Avert 30,000 Premature Deaths—EPA Report,” E&E News PM, September 22, 2006.

Industrial Economics, Incorporated, Expanded Expert Judgment Assessment of the Concentration-Response

Relationship Between PM2.5 Exposure and Mortality, Cambridge, MA, September 21, 2006.

U.S. EPA, Regulatory Impact Analysis of the 2006 National Ambient Air Quality Standards for Fine Particle

Pollution (PM2.5), Table ES-1, available at http://epa.gov/pm/actions.html.

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areas tend to be designated nonattainment, even if only one county in the area has readings worse

than the standard. Second, the nonattainment counties tend to have larger populations than those

in attainment: 88 million people (about 30% of the U.S. population) live in the 208 counties

designated nonattainment for the current standard. The new standard may affect an even larger

percentage of the population.

Implementation of the NAAQS

A NAAQS does not directly limit emissions; rather, it represents the EPA Administrator’s formal

judgment regarding the level of ambient pollution that will protect public health with an adequate

margin of safety. Promulgation of a NAAQS sets in motion a process under which the states and

EPA first identify nonattainment areas. After these areas are formally designated (a process EPA

estimates will take until April 2010 for the revised PM2.5 standard), the states have three years to

submit State Implementation Plans (SIPs) that identify specific regulations and emission control

requirements that will bring the area into attainment. Attainment of the revised standard is to be

achieved by 2015, according to EPA, with a possible extension to 2020.

Issues

A number of issues were raised during consideration of the proposed standards, and most remain

in the wake of the Administrator’s decision. Those who would like to see stronger standards

(including a number of states and environment and health groups) have focused on the agency’s

disregard of CASAC’s recommendation that the annual PM2.5 standard be strengthened. Some

industrial and agricultural interests, on the other hand, are questioning the agency’s strengthening

of the standard for all fine particles, without distinguishing their source or chemical composition.

The agency’s response to this is that “... studies suggest that many different chemical components

of fine particles and a variety of different types of source categories are all associated with, and

probably contribute to, mortality, either independently or in combinations.”15 These and other

issues may be raised in court challenges or in congressional oversight. The Clean Air

Subcommittee of the Senate Environment and Public Works Committee held oversight hearings

on the PM proposal, July 13 and July 19, 2006.

(For a more detailed discussion of the new NAAQS, see CRS Report RL33254, Air Quality:

EPA’s 2006 Changes to the Particulate Matter (PM) Standard, by (name redacted) and (name red

acted).)

Clear Skies/Multi-Pollutant Legislation

A major focus of congressional attention in the first session of the 109th Congress was whether to

take action on the Clear Skies Act, a bill that would regulate multiple pollutants from coal-fired

electric power plants. A tie vote in the Senate Environment and Public Works Committee blocked

a Senate version of the bill, S. 131, from advancing to the Senate floor, March 9, 2005. The

committee’s 9-9 vote brought to an end, probably for the remainder of the Congress, further

EPA Office of Research and Development, Air Quality Criteria for Particulate Matter, p. 9-31, as cited in Section

II.C. of the Preamble to the Final Particulate Rule. See 71 Federal Register 61162 et seq., October 17, 2006, for

additional discussion.

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attempts to find a compromise on Clear Skies amendments. Earlier markups of Clear Skies,

scheduled for February 16, March 2, and March 3, 2005, had been postponed so that Senators

could undertake discussions aimed at crafting a compromise. The bill would have significantly

amended the Clean Air Act to establish a cap-and-trade system for emissions from electric power

plants and other sources of air pollution, while eliminating or deferring numerous existing

regulations affecting those sources.

Coal-fired power plants are among the largest sources of air pollution in the United States. Under

the Clean Air Act, they are not necessarily subject to stringent requirements. Emissions and the

required control equipment can vary depending on the location of the plant, when it was

constructed, whether it has undergone major modifications, the specific type of coal it burns, and,

to some extent, the vagaries of EPA enforcement policies. More than half a dozen separate Clean

Air Act programs could potentially be used to control emissions, which makes compliance

strategy complicated for utilities and difficult for regulators. And, since the cost of the most

stringent available controls, for the entire industry, could range into the tens of billions of dollars,

utilities have fought hard and rather successfully to limit or delay regulation.

As a result, emissions from power plants have not been reduced as much as those from some

other sources. Many plants built in the 1950s or 1960s (generally referred to as “grandfathered”

plants) have little emission control equipment. Collectively, these plants are large sources of

pollution. In 2003, power plants accounted for nearly 11 million tons of sulfur dioxide (SO2)

emissions (69% of the U.S. total), about 45 tons of mercury emissions (more than 40% of the

U.S. total), and nearly 4.5 million tons of nitrogen oxides (22% of the U.S. total). Power plants

are also considered major sources of fine particles (PM2.5) and account for about 40% of U.S.

anthropogenic emissions of the greenhouse gas carbon dioxide.

An example of their importance was seen in the August 2003 Northeast blackout. With about 100

power plants (most of them coal-fired) shut down, researchers found that ambient levels of SO2

and ozone were 90% and 50% lower, respectively, in blacked-out areas.

With new ambient air quality standards for ozone and fine particles taking effect, emissions of

NOx (which contributes to the formation of ozone) and SO2 (which is among the sources of fine

particles) need to be reduced to meet standards. Mercury emissions have also been a focus of

concern: 44 states have issued fish consumption advisories for mercury, covering 13 million acres

of lakes, 765,000 river miles, and the coastal waters of 12 entire states. The continuing

controversy over the interpretation of New Source Review requirements for existing power plants

(discussed at greater length in a separate section below) is also exerting pressure for a more

predictable regulatory structure.

Thus, many in industry, environmental groups, Congress, and the Administration agree that the

time is ripe for legislation that addresses power plant pollution in a comprehensive (multipollutant) fashion. Such legislation (the Administration version of which is dubbed “Clear Skies”)

would address the major pollutants on a coordinated schedule, and would rely, to a large extent,

on a system like that used in the acid rain program, where national or regional caps on emissions

are implemented through a system of tradeable allowances. The key questions have been how

stringent the caps should be, and whether carbon dioxide (CO2) will be among the emissions

subject to a cap.

Regarding the stringency issue, Clear Skies and other bills introduced in this Congress would

require reduction of NOx emissions to somewhere between 1.5 and 1.8 million tons per year (a

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70%-80% reduction from 1998 levels) and reduction of sulfur dioxide emissions to 2.0-3.0

million tons per year (also a reduction of 70%-80% versus 1998). Regarding mercury, the bills

would either require EPA to determine the level of reductions, or require reductions of 70%-90%

from current levels of emissions (from 45 to somewhere between 5 and 15 tons annually,

depending on the bill).

In the most stringent of the bills (Senator Jeffords’ S. 150 and Representative Waxman’s H.R.

1451), these reductions would take place by 2009 or 2010 (depending on the pollutant). The

Jeffords and Waxman bills would also set caps on CO2 emissions. (For additional information and

a detailed comparison of the legislative proposals, see CRS Report RL32755, Air Quality: MultiPollutant Legislation in the 109th Congress, by (name redacted) and (name redacted).)

The Clear Skies bill (S. 131) envisions less stringent standards than those in most other bills,

phased in over a much longer period of time. For NOx, the bill would reduce emissions to 1.79

million tons per year, but not until 2018; an intermediate limit of 2.19 million tons would be

imposed in 2008. For sulfur dioxide, the limit would be 3.0 million tons annually, also in 2018,

with an intermediate limit of 4.5 million tons in 2010. For mercury, the limit would be 34 tons per

year in 2010, declining to 15 tons in 2018. (In negotiations over S. 131, Senators Voinovich and

Inhofe offered to change the Phase 2 deadlines under Clear Skies to 2016, and to implement a

Phase 3 SO2 cap of 2.5 million tons in 2018.)

Because the deadlines are far in the future, the Administration’s analysis of Clear Skies shows

that utilities would be likely to “overcomply” in the early years of the program. The

Administration uses this as a selling point for its approach, arguing that it will achieve reductions

sooner than would a traditional regulatory approach with the same deadlines. But overcompliance

in the early years would lead to “banked” emission allowances; these could be used in later years

to delay achievement of required reductions. In its analysis of the bill, EPA does not expect to see

the full 70% emission reductions until 2026 or later, a point seized upon by its opponents to

support a more aggressive approach.

In return for establishing its new cap-and-trade program, Clear Skies would also eliminate or

restrict numerous existing Clean Air Act requirements with respect to electric generating units,

including New Source Review, New Source Performance Standards, Prevention of Significant

Deterioration, Lowest Achievable Emission Rate standards, Best Available Retrofit Technology,

and Maximum Achievable Control Technology regulations for mercury. It would allow sources in

other industries to opt into the cap-and-trade program, and escape existing Clean Air Act controls.

It would remove deadlines for local areas to achieve ozone and particulate standards under certain

conditions, and make it more difficult for nonattainment areas to challenge interstate sources of

air pollution. The other bills generally would leave these existing controls in place. (For a more

thorough discussion of how Clear Skies would change the Clean Air Act, see CRS Report

RL32782, Clear Skies and the Clean Air Act: What’s the Difference?, by (name redacted) and (name

redacted).)

Clear Skies includes no cap on CO2 emissions. It is a three-pollutant (SO2, NOx, mercury) bill,

whereas most competing bills have addressed four pollutants (the three plus CO2). The

Administration views controls on CO2 as a step toward implementing the Kyoto Protocol to the

United Nations Framework Convention on Climate Change, which it opposes for a variety of

reasons, principally the potential economic impacts on U.S. industries.

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The absence of CO2 from the mix leads to different strategies for achieving compliance,

preserving more of a market for coal, and lessening the degree to which power producers might

switch to natural gas or renewable fuels as a compliance strategy. In its opposition to CO2

controls, the Administration is supported by most in the utility and coal industries. Others, mostly

outside these industries but including some utilities, view CO2 controls as inevitable, if not

desirable, and support simultaneous implementation of cap-and-trade programs for CO2 and the

other pollutants.

Although stalled for the previous three years, Clear Skies was set for early consideration in the

109th Congress by the Senate Environment and Public Works Committee; but the opposing sides

were not able to reach a consensus and the bill failed on a tie vote on March 9, 2005. The House

has taken no action, other than an Energy and Commerce subcommittee hearing, May 26, 2005.

In negotiations preceding the Senate committee vote, there was some movement toward a

compromise. On the Republican side, there were offers to move the deadlines for Phase 2 caps

forward two years (from 2018 to 2016) and to add a third phase for SO2; a mechanism for

addressing mercury hot spots was added; and adjustments to the provisions on interstate transport

of pollution were offered. The opponents of the bill (who included all the committee Democrats,

plus Senators Jeffords and Chafee) conceded that a bill with stringent CO2 caps would not pass,

and were willing to accept some less stringent provisions on that score. These compromises

proved insufficient to bridge the gap. Whether they might serve as a basis for further discussions

and action later in the Congress now appears doubtful.

Immediately following the vote, on March 10, 2005, EPA announced that it would promulgate

final regulations for utility emissions of SO2 and NOx in 28 eastern states and the District of

Columbia through its Clean Air Interstate Rule (CAIR). 16 The cap-and-trade provisions of CAIR

mimic those of Clear Skies, but CAIR does not allow EPA to remove existing Clean Air Act

requirements, as Clear Skies would. Under CAIR, EPA projects that nationwide emissions of SO2

will decline 53% by 2015, and NOx emissions will decline 48%. The agency also projects that the

rule will result in $85-$100 billion in health benefits annually by 2015, including the prevention

of 17,000 premature deaths annually.17 CAIR’s health and environmental benefits are more than

25 times greater than its costs, according to EPA. (For additional information on the CAIR rule,

see CRS Report RL32927, Clean Air Interstate Rule: Review and Analysis, by (name redacted).)

Finally, one of the issues raised by opponents of Clear Skies has been EPA’s reluctance to conduct

a cost-benefit analysis of the competing bills. On October 27, 2005, the agency responded to this

criticism by producing an analysis of the costs and benefits of Clear Skies and two Senate bills:

Senator Jeffords’ S. 150, and Senator Carper’s 108th Congress bill.18 (The Carper bill that was

analyzed was S. 843 from the 108th Congress. Subsequent to EPA’s analysis, on May 4, 2006,

Senator Carper introduced a new bill, S. 2724.)

The rule appeared in the Federal Register on May 12, 2005 (70 FR 25162).

U.S. EPA, Office of Air and Radiation, “Clean Air Interstate Rule—Basic Information,” available at

http://www.epa.gov/interstateairquality/basic.html.

Rather than a single document, the agency actually released a group of 45 documents: an 18-page “Comparison

Briefing”; a 4-page table comparing the options; separate analyses of each of the six options; and 37 background

documents. This group of 45 documents is the agency’s cost-benefit analysis. The full package is available at

http://www.epa.gov/airmarkets/mp/.

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The EPA analysis found significant benefits that exceed costs for all three bills, but it started from

a baseline that did not include three recently promulgated regulations—notably the CAIR rule,

whose requirements and benefits are similar to those of Clear Skies. Adjusting for the three

regulations, one finds that Clear Skies would have negligible incremental costs and added

benefits of $6 billion in 2010 and $3 billion in 2020. For the same years, Senator Carper’s bill

would have annual net benefits 8 and 5 times as great as Clear Skies at annual costs of $4.2

billion in 2010 and $3 billion in 2020, and Senator Jeffords’ bill would have annual net benefits

10 and 16 times those of Clear Skies at annual costs of $23.6 billion (in 2010) and $18.1 billion

(in 2020). The analysis contains a number of assumptions that have substantial impacts on the

results; for a more complete discussion, see CRS Report RL33165, Costs and Benefits of Clear

Skies: EPA’s Analysis of Multi-Pollutant Clean Air Bills, by (name redacted) and (name redacted).

Mercury from Power Plants

On March 15, 2005, EPA also finalized through regulation a cap-and-trade program for mercury

emissions from electric utilities.19 The mercury regulations (which, like CAIR, mimic the

requirements of Clear Skies) rely almost entirely on co-benefits of the CAIR rule. The agency’s

analysis of the mercury rule finds that less than 1% of coal-fired power plant capacity would

install pollution control equipment specifically designed to control mercury within 10 years as a

result of the mercury rule. By 2020, only 4% of capacity would have such equipment.

EPA reversed course several times before choosing its final approach to mercury regulation. The

agency was required by the terms of the 1990 Clean Air Act Amendments and a 1998 consent

agreement to determine whether regulation of mercury from power plants under Section 112 of

the Clean Air Act was appropriate and necessary. It concluded that it was so, in a December 2000

regulatory finding. The finding triggered other provisions of the consent agreement: that the

agency propose Maximum Achievable Control Technology (MACT) standards for electric power

plants by December 15, 2003, and finalize them by March 15, 2005.

The December 2003 proposal offered two alternatives. The first met the agency’s requirement

under the consent agreement by proposing MACT standards. The standards would have applied

on a facility-by-facility basis, and would have resulted in emissions of 34 tons of mercury

annually, a reduction of about 30% from the 1999 level. The standards would have taken effect in

2008, three years after promulgation, with possible one-year extensions.

The second mercury alternative, a variant of which the agency chose to promulgate March 15,

2005, uses Section 111(d) of the act. To avoid having to promulgate MACT standards, the agency

proposed reversing its December 2000 regulatory finding, arguing that while MACT standards

were “appropriate,” they were not “necessary,” since the emissions could be controlled under

Section 111(d) instead. Section 111(d) has rarely been used before—and never for hazardous air

pollutants. In the final rule, the agency went a step further, concluding that MACT regulations are

neither appropriate nor necessary, and so revises its December 2000 regulatory finding.

The mercury rule appeared in the Federal Register in two parts: in the first part, on March 29, 2005 (as explained

further in the text below), the agency revised its determination that mercury emissions from electric generating units

should be regulated as hazardous air pollutants under Section 112 of the Clean Air Act (70 FR 15994); in the second

part, on May 18, 2005, the agency promulgated a cap-and-trade program under Section 111 of the act (70 FR 28606).

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The final regulations establish a national cap-and-trade system for power plant emissions of

mercury. As in Clear Skies, the cap will be 15 tons of emissions nationwide in 2018 (about a 70%

reduction from 1999 levels, if achieved). There will also be an intermediate cap of 38 tons in

2010. The caps will be implemented through an allowance system similar to that used in the acid

rain program, through which utilities can either control the pollutant directly or purchase excess

allowances from other plants that have controlled more stringently or sooner than required. As

with Clear Skies, early reductions could be banked for later use, which the agency says would

result in emissions of 31.3 tons in 2010, nearly 7 tons less than the cap. If this happens, it would

allow utilities to delay compliance with the full 70% reduction until well beyond 2018, as they

use up banked allowances rather than installing further controls. The agency’s analysis projects

actual emissions to be 24.3 tons (less than a 50% reduction) as late as 2020. Full compliance with

the 70% reduction would be delayed until after 2025.20

Besides the stretched out implementation schedule, one of the main criticisms of the cap-andtrade proposal is that it would not address “hot spots,” areas where mercury emissions and/or

concentrations in water bodies are greater than elsewhere. It would allow a facility to purchase

allowances and avoid any emission controls, if that compliance approach makes the most sense to

the plant’s owners and operators. If plants near hot spots do so, the cap-and-trade system may not

have an impact on mercury concentrations in the most contaminated areas. By contrast, a MACT

standard would have required reductions at all plants, and would therefore be expected to

improve conditions at hot spots.

Many argue that the mercury regulations should be more stringent or implemented more quickly.

To a large extent, these arguments and EPA’s counterarguments rest on assumptions concerning

the availability of control technologies. Controlling SO2, NOx, and mercury simultaneously, as

the agency prefers, would allow utilities to maximize “co-benefits” of emission controls. Controls

such as scrubbers and fabric filters, both of which are widely used today to control SO2 and

particulates, have the side effect of reducing mercury emissions to some extent. Under EPA’s capand-trade regulations, both the 2010 and 2018 mercury emission standards are set to maximize

use of these co-benefits. Thus, few controls would be required to specifically address mercury

emissions before the 2020s; the costs specific to controlling mercury would be minimal; and

emissions would decline to about 50% of the 1999 level in 2020.

Besides citing the cost advantage of relying on co-benefits, EPA has claimed that technology

specifically designed to control mercury emissions (such as activated carbon injection, ACI)

would not be generally available until after 2010. This assertion is widely disputed. ACI and

fabric filters have been in use on municipal waste and medical waste incinerators for a decade,

and have been successfully demonstrated in at least 16 full-scale tests at coal-fired power plants,

for periods as long as a year. Manufacturers of pollution controls and many others maintain that,

if the agency required the use of ACI and fabric filters at power plants, reductions in mercury

emissions as great as 90% could be achieved at reasonable cost in the near future.

The agency can take cost into consideration under the MACT or cap-and-trade rules, and cost to

electric utilities appears to have been a determining factor in EPA’s analysis. In its proposal,

however, calculations of the overall societal costs and benefits seemed to support the imposition

U.S. EPA, Office of Air Quality Planning and Standards, Regulatory Impact Analysis of the Clean Air Mercury Rule,

March 2005, Table 7-3, p. 7-5, available at http://www.epa.gov/ttn/atw/utility/ria_final.pdf. For further discussion see

CRS Report RL32868, Mercury Emissions from Electric Power Plants: An Analysis of EPA’s Cap-and-Trade

Regulations, January 13, 2006, p. 7.

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of a more stringent standard. The agency projected MACT compliance costs at $945 million per

year, versus quantifiable annual benefits (from longer lives and less illness) of more than $15

billion (a 16 to 1 advantage). The final rule completely changes this analysis. It concludes that the

benefits of mercury control are at most $43 million per year, with annual costs as high as $896

million. The new analysis did not include several peer-reviewed studies that indicated stricter

utility mercury rules would have yielded large benefits.

In addition to the arguments over technology availability and cost, it is unclear whether EPA has

legislative authority to establish a cap-and-trade program for mercury: many argue that the

agency is required by the statute to impose MACT standards on each individual plant once it has

decided to control mercury emissions. Questions have also arisen regarding the role of industry

lobbyists in crafting portions of the EPA proposal. For many of these reasons, 45 Senators wrote

EPA Administrator Leavitt at the beginning of April 2004 to request that he withdraw the mercury

proposal and begin over. In June, 2004, 178 House members wrote Leavitt that they hoped further

review “will lead to a stronger final rule.” On February 3, 2005, the EPA Inspector General

echoed these comments, concluding that EPA senior management instructed the staff to develop a

standard that would result in emissions of 34 tons annually, instead of basing the standard on

unbiased analysis. Nevertheless, the agency weakened the final rule rather than strengthening it.21

Thus, opponents, including at least 15 states, have filed suit to overturn it.22

Congress could also have played a role in reversing the rule, under the provisions of the

Congressional Review Act (5 U.S.C. Sections 801-808). On June 29, 2005, Senator Leahy and 31

cosponsors introduced S.J.Res. 20; on the same day, a similar resolution (H.J.Res. 56) was

introduced in the House by Representative Meehan. If enacted into law, these resolutions would

have disapproved the rule EPA promulgated on March 29, 2005, in which the agency determined

not to regulate mercury from fossil-fueled electric utility units under Section 112. The net effect

of disapproval would have been that EPA would be forced to issue MACT standards for coal- and

oil-fired electric power plants. On September 13, however, the Senate rejected S.J.Res. 20, 51-47,

thus allowing the EPA rule to go forward. The Senate action has no effect on judicial challenges,

which are still pending.

In addition to judicial challenges, most of the same states and several environmental groups

petitioned EPA to reconsider the mercury rules, in part, they said, because portions of the final

rules had not been included in the proposal, and therefore the public had been denied the

opportunity to comment. EPA agreed to a reconsideration on October 21, 2005. On May 31, 2006,

the agency announced that it had completed the reconsideration, making only minor changes to

the rule. The agency’s action means that court proceedings, which were held in abeyance while

the agency reconsidered, can now move forward.

(For additional information on the mercury rule, see CRS Report RL32868, Mercury Emissions

from Electric Power Plants: An Analysis of EPA’s Cap-and-Trade Regulations, by (name red

acted); and CRS Report RL32744,

Mercury Emissions from Electric Generating Units: A

Review of EPA Analysis and MACT Determination, by (name redacted) et al. For discussion of the

Office of the Inspector General, U.S. EPA, Additional Analyses of Mercury Emissions Needed Before EPA Finalizes

Rules for Coal-Fired Electric Utilities, February 3, 2005, p. 10, available at http://www.epa.gov/oig/reports/2005/

20050203-2005-P-00003.pdf.

New Jersey v. EPA, No. 05-1097 (D.C. Cir.) Filed Mar. 29, 2005.

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Congressional Review Act and how it applied to the mercury rule, see CRS Report RS22207,

Congressional Review of EPA’s Mercury Rule, by (name redacted) and (name redacted).)

New Source Review (NSR)

A related issue that has driven some of the debate over the regulation of power plant emissions is

whether EPA has adequately enforced existing regulations, using a process called New Source

Review. The New Source Review debate has occurred largely in the courts. EPA took a more

aggressive stance on New Source Review under the Clinton Administration, filing lawsuits

against 13 utilities for violations at 51 plants in 13 states. The Bush Administration has taken

action against an additional half a dozen utilities, but has made little headway in settling the

original suits or in bringing them to trial. In the meantime, it has proposed major changes in the

NSR regulations that critics argue will gut New Source Review as it pertains to modifications of

existing plants.

The controversy over the NSR process stems from EPA’s application of New Source Performance

Standards to existing stationary sources of air pollution that have been modified. The Clean Air

Act states that new sources (subject to NSR and its requirement to install pollution controls)

include modifications of existing sources as well as plants that are totally new. Industry has

generally avoided the NSR process, however, by claiming that changes to existing sources were

“routine maintenance” rather than modifications. In the 1990s, EPA began reviewing records of

electric utilities, petroleum refineries, and other industries to determine whether the changes

were, in fact, routine. As a result of these reviews, since late 1999, EPA and the Department of

Justice have filed suit or administrative actions against numerous large sources of pollution,

alleging that they made major modifications to their plants, extending plant life and increasing

output without undergoing required New Source Reviews and without installing best available

pollution controls.

Of the utilities charged with NSR violations, 11 have settled with EPA, generally without going to

trial. Under the settlements, they have agreed to spend about $5 billion over the next decade on

pollution controls or fuel switching in order to reduce emissions at their affected units. Combined,

these companies will reduce pollution by about 775,000 tons annually. Since July 25, 2000, the

agency has also reached 17 agreements with petroleum refiners representing three-fourths of

industry capacity. The refiners agreed to settle potential charges of NSR violations by paying

fines and installing equipment to eliminate 315,000 tons of pollution.

About half the utilities charged with NSR violations have not settled with EPA. They and other

critics of the agency’s enforcement actions claim that EPA reinvented the rules. They also contend

that a strict interpretation of what constitutes routine maintenance will prevent them from making

changes that would have previously been allowed without a commitment of time and money for

permit reviews and the installation of expensive pollution control equipment. This provides

disincentives for power producers, refiners, and others to expand output at existing facilities, they

maintain.

The first case involving one of the nonsettling utilities went to trial in February 2003. In an

August 7, 2003, decision, the U.S. District Court for the Southern District of Ohio found that

Ohio Edison had violated the Clean Air Act 11 times in modifying its W. H. Sammis power plant.

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The company subsequently settled the case, agreeing to spend $1.1 billion to install controls that

are expected to reduce pollution by 212,000 tons annually. 23 In a second case, decided in April

2004 and currently on appeal to the U.S. Supreme Court, Duke Energy was found not to have

violated the act despite undertaking modifications that increased total emissions without

undergoing New Source Review. The U.S. District Court for the Middle District of North

Carolina, in a decision upheld by the Fourth Circuit Court of Appeals, held that since the

maximum hourly emissions rate did not increase as a result of the modifications, even if annual

emissions did increase, the company was not required to undergo NSR and install more stringent

pollution controls.24

While pursuing these enforcement actions, the Bush Administration has promulgated a number of

changes to the NSR regulations that would make future enforcement of NSR less likely. In

December 2002 and October 2003, the agency promulgated five sets of changes to the NSR rules.

The most controversial were new regulations defining what constitutes routine maintenance. 25

The new regulations would have exempted industrial facilities from undergoing NSR (and thus

from installing new emission controls) if they were replacing safety, reliability, and efficiencyrated components with new, functionally equivalent equipment, and if the cost of the replacement

components was less than 20% of the replacement value of the process unit. Using this

benchmark, few, if any, plant modifications would trigger new pollution controls.

These changes were highly controversial. The Administration and its supporters characterized

them as streamlining or improving the program; others saw them as permanently

“grandfathering” older, more polluting facilities from ever having to meet the clean air standards

required of newer plants. Fifteen states, three municipalities, and several environmental groups

filed suit to block the “equipment replacement / routine maintenance” rule. The rule was stayed

by the U.S. Court of Appeals for the D.C. Circuit on December 24, 2003. On March 17, 2006, a

three-judge panel of the court unanimously struck the rule down. In its decision, the court held

that EPA’s attempt to change the NSR regulations was “contrary to the plain language” of the

Clean Air Act.26

EPA proposed further changes to the NSR regulations October 20, 2005 and September 8, 200627;

these regulations have yet to be promulgated. Under the October 2005 proposal, power plants

could modify existing facilities without triggering NSR, provided that the facility’s “maximum

hourly emissions achievable” after the changes were no greater than the same measure at any

point during the past five years. By focusing on the hourly rate, rather than the previous measure

(annual emissions), the new rule would effectively allow increases in annual emissions any time a

modification led to an increase in the hours of operation of a facility. The agency’s proposal stated

that this change would establish a uniform national emissions test, in conformance with the

Fourth Circuit’s decision in the Duke Energy case, and it downplayed the significance of the

change in light of “substantial emissions reductions from other CAA [Clean Air Act]

United States v. Ohio Edison Co., No. C-2-99-1181, [S.D. Ohio].

United States v. Duke Energy Corp., 278 F.Supp. 2d 619 [M.D.N.C. 2003] affirmed, 411 F. 3d 539 [4th Cir., 2005],

petition for cert. Filed [No. 05-848].

These changes appeared in the Federal Register on October 27, 2003 (68 FR 61247).

State of New York v. EPA, No. 03-1380, 2006 Westlaw 662746 [D.C. Cir., Mar. 17, 2006].

70 FR 61081, October 20, 2005. The September 2006 proposal had not yet appeared in the Federal Register as of this

writing, but it is available on EPA’s website at http://www.epa.gov/nsr/documents/dapn_frn_9-8-06.pdf. It would limit

application of NSR by allowing plants to consider emissions only from the unit undergoing modification, rather than

the entire plant, in determining whether NSR applies.

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requirements that are more efficient.” But internal EPA documents released by an environmental

group indicate that the proposed rule was strongly opposed by the Air Enforcement Division,

whose Director concluded that it would adversely affect the agency’s NSR enforcement cases and

is largely unenforceable as written. 28

Thus, there appears to be a serious conflict between EPA’s regulatory actions and its enforcement

stance. While the agency stated in promulgating the equipment replacement rule that “we do not

intend our actions today to create retroactive applicability for today’s rule,” continued pursuit of

the enforcement actions filed during the Clinton Administration would create a double standard

for utilities, with one set of rules applicable to those utilities unlucky enough to have been cited

for violations prior to promulgation of the new rule, and a different standard applicable afterward.

Despite earlier agency denials that the rule would affect ongoing investigations, in early

November 2003, EPA’s enforcement chief, J. P. Suarez, and another EPA official were reported to

have indicated that the agency would drop enforcement actions against 47 facilities that had

already received notices of violation, and would drop investigations of possible violations at an

additional 70 power companies. Agency staff who were involved in the enforcement actions note

that the prospect of an NSR rollback caused utilities already charged with violations to withdraw

from settlement negotiations over the pending lawsuits, delaying emission reductions that could

have been achieved in the near future.29 (For additional information, see CRS Report RS21608,

Clean Air and New Source Review: Defining Routine Maintenance, and CRS Report RL31757,

Clean Air: New Source Review Policies and Proposals, both by (name redacted).)

At Congress’s direction, the National Academy of Sciences began a review of the NSR program

in May 2004. An interim report, released in January 2005, said the committee had not reached

final conclusions, but it also said: “In general, NSR provides more stringent emission limits for

new and modified major sources than EPA provides in other existing programs”; and “It is ...

unlikely that Clear Skies would result in emission limits at individual sources that are tighter than

those achieved when NSR is triggered at the same sources.”30 The final report, issued July 21,

2006, found that,

More than 60% of all coal-fired electricity-generation capacity in the United States currently

lacks the kinds of controls for SO2 and NOx emissions that have been required under NSR.

Also, the older facilities are more likely than newer facilities to undergo maintenance, repair,

and replacement of key components, so a substantial portion of emissions from the

electricity-generating sector is potentially affected by the NSR rule changes.31

Nevertheless, the report reached ambivalent conclusions. On the one hand, the report stated, “It is

reasonable to conclude that the implementation of the ERP [the proposed Equipment

Replacement Provision] could lead to SO2 and NOx emission increases in some locations and

Memorandum of Adam M. Kushner, Director, Air Enforcement Division, U.S. EPA, to William Harnett, Director,

Information Transfer and Program Integration Division, Office of Air Quality Planning and Standards, August 25,

2005, p. 1.

See, for example, “Departing EPA Official Issues Broadside at Administration Air, Enforcement Programs,” Daily

Environment Report, March 1, 2002, p. AA-1. Also, “Second Former EPA Enforcement Official Raps Bush’s New

Source Review Reforms,” Daily Environment Report, October 22, 2002, p. A-9.

National Research Council of the National Academies, Interim Report of the Committee on Changes in New Source

Review Programs for Stationary Sources of Air Pollutants (Washington, D.C.: The National Academies Press, 2005),

p. 27.

National Research Council of the National Academies, New Source Review for Stationary Sources of Air Pollutants

(Washington, D.C.: The National Academies Press, 2006), Prepublication Copy, p. 3.

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decreases in others.”32 On the other hand, “the committee concluded overall that, because of a

lack of data and the limitations of current models, it is not possible at this time to quantify with a

reasonable degree of certainty the potential effects of the NSR rule changes on emissions, human

health, energy efficiency, or on other relevant activities at facilities subject to the revised NSR

program.”33

Besides the NAS study, on April 21, 2003, the National Academy of Public Administration

released a report commissioned by Congress that made sweeping recommendations to modify

NSR. The study panel recommended that Congress end the “grandfathering” of major air

emission sources, by requiring all major sources that have not obtained an NSR permit since 1977

to install Best Available Control Technology or Lowest Achievable Emissions Rate control

equipment. In the interim, the NAPA panel concluded, EPA and the Department of Justice should

continue to enforce NSR vigorously, especially for changes at existing facilities. 34

MTBE and Ethanol

Congress acted on several Clean Air Act issues in H.R. 6, the comprehensive energy bill that it

passed and sent to the President July 29, 2005. The most significant of these issues dealt with

ethanol and reformulated gasoline (RFG). The final version of the bill stripped most provisions

dealing with the related issue of MTBE, a gasoline additive that competes with ethanol and has

been the subject of much controversy.

Until recently, MTBE and ethanol were used to meet Clean Air Act requirements that

reformulated gasoline (RFG), sold in the nation’s worst ozone nonattainment areas, contain at

least 2% oxygen, to improve combustion. Under the RFG program, areas with “severe” or

“extreme” ozone pollution (124 counties with a combined population of 73.6 million) must use

reformulated gas; areas with less severe ozone pollution may opt into the program as well, and

many have. In all, portions of 17 states and the District of Columbia use RFG, and about 30% of

the gasoline sold in the United States is RFG.

Implemented in 1995, the law required (until May of this year) that RFG contain at least 2%

oxygen by weight. Refiners could meet this requirement by adding a number of ethers or

alcohols, any of which contains oxygen and other elements. By far the most commonly used

oxygenate has been MTBE. In 1999, 87% of RFG contained MTBE, a number reduced to 46% by

2004. MTBE has also been used since the late 1970s in non-reformulated gasoline, as an octane

enhancer, at lower concentrations. As a result, gasoline with MTBE has been used virtually

everywhere in the United States, whether or not an area has been subject to RFG requirements.

MTBE leaks, generally from underground gasoline storage tanks, have been implicated in

numerous incidents of ground water contamination. The substance creates taste and odor

problems in water at very low concentrations, and some animal studies indicate it may pose a

potential cancer risk to humans. For these reasons, 25 states have taken steps to ban or regulate its

use. The most significant of the bans (in California, New York, and Connecticut) took effect at the

Ibid., p. 5.

Ibid., p. 2.

National Academy of Public Administration, A Breath of Fresh Air: Reviving the New Source Review Program,

Summary Report, April 2003, p. 3.

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end of 2003, leading many to suggest that Congress revisit the issue to modify the oxygenate

requirement and set more uniform national requirements regarding MTBE and its potential

replacements (principally ethanol).

Support for eliminating the oxygen requirement on a nationwide basis has been widespread

among the petroleum industry, environmental groups, and states. In general, these groups have

concluded that gasoline can meet the same low emission performance standards as RFG without

the use of oxygenates. But opposition to enacting legislation removing the oxygen requirement

came from a number of agricultural interests. Nearly 13% of the nation’s corn crop was used to

produce the competing oxygenate, ethanol, in 2004. If MTBE use were reduced or phased out,

but the oxygen requirement remained in effect, ethanol use would soar, increasing demand for

corn. Ethanol use has already grown substantially as MTBE began to be phased out. Conversely,

if the oxygen requirement were waived by EPA or by legislation, not only would MTBE use

decline, but likely, so would demand for ethanol. Thus, Members of Congress and Senators from

corn states took a keen interest in MTBE and RFG legislation.

As passed by the House on April 21, 2005, H.R. 6 contained numerous MTBE and ethanol

provisions. With some potential exceptions, it would have banned the use of MTBE as a fuel

additive, except in states that specifically authorized its use, after December 31, 2014. The Clean

Air Act requirement to use MTBE or other oxygenates in RFG would have been repealed—270

days after enactment in most states, immediately in California. In place of this requirement, the

bill substituted a major stimulus to the use of ethanol: under a renewable fuels standard (RFS),

annual production of gasoline would have been required to contain at least 5 billion gallons of

ethanol or other renewable fuel (an increase from 3.4 billion gallons in 2004) by 2012. To prevent

backsliding on air quality, the bill required that the reductions in emissions of toxic substances

achieved by RFG be maintained; it authorized $2 billion in grants to assist merchant MTBE

production facilities in converting to the production of other fuel additives. The bill also

authorized funds for MTBE cleanup, and perhaps most controversially, would have provided a

“safe harbor” from defective product liability lawsuits for producers of MTBE, ethanol, and other

renewable fuels: product liability lawsuits have been used to force petroleum and chemical

companies to pay for cleanup of ground and surface water contaminated by releases of fuels

containing MTBE.

The Senate version of H.R. 6, passed June 28, 2005, contained MTBE and ethanol provisions as

well, but they were different from the House bill in several respects. The Senate bill would have

increased the renewable fuels standard to 8 billion gallons by 2012. It would have phased out the

use of MTBE sooner (within four years of enactment, rather than at the end of 2014), and it

omitted a potential nationwide presidential exception to the MTBE ban that the House version

would have provided. The Senate version also omitted the safe harbor for MTBE producers. In

the 108th Congress, the safe harbor provision had been among the most controversial provisions

in a similar bill, cited by numerous opponents in Senate debate on the conference report. (The

opponents prevailed on a cloture motion, and the bill died.) The 109th Congress Senate bill also

differed in how much it would authorize for cleanup of MTBE releases and for transition

assistance to MTBE producers.

In the end, unable to reach a compromise addressing MTBE, House and Senate conferees stripped

most of the MTBE provisions from the conference report on H.R. 6. The final version, approved

by the House July 28, 2005 and the Senate July 29, and signed into law (P.L. 109-58) by the

President August 8, 2005, neither bans MTBE use nor provides a safe harbor for its producers,

nor does it provide transition assistance for MTBE producers. It does, however, repeal the RFG

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program’s oxygen requirement and, in place, requires that motor fuels contain 7.5 billion gallons

of ethanol or other renewable fuels by 2012—more than double the amount of 2004 consumption.

When this requirement is fully implemented, as much as 30% of the nation’s corn crop could be

dedicated to ethanol production. (For additional discussion of the House and Senate bills, see

CRS Report RL32865, Renewable Fuels and MTBE: A Comparison of Provisions in the Energy

Policy Act of 2005 (P.L. 109-58 and H.R. 6), by (name redacted), (name redacted), and (name red

acted). For background on the MTBE issue, see CRS Report RL32787,

MTBE in Gasoline:

Clean Air and Drinking Water Issues, by (name redacted) and (name redacted). For information

on ethanol, see CRS Report RL33290, Fuel Ethanol: Background and Public Policy Issues, by

(name redacted).)

Ozone Nonattainment Area Deadlines

Another Clean Air Act provision that was in the House-passed version of H.R. 6 dealt with the

deadlines for attaining air quality standards. Section 1443 of the bill would have extended

deadlines for areas that have not attained the ozone air quality standard if upwind areas

“significantly contribute” to their nonattainment.

Under the 1990 Clean Air Act Amendments, ozone nonattainment areas with higher

concentrations of the pollutant were given more time to reach attainment, but in return for the

additional time, they were required to implement more stringent controls on emissions. Failure to

reach attainment by the specified deadline was to result in reclassification of an area to a higher

category and the imposition of more stringent controls. Section 1443 would have amended this

system to extend deadlines (without requiring more stringent controls) in areas affected by

upwind sources of pollution. There was no comparable provision in the Senate bill, and the

conferees did not include the House provision in the enacted law.

As enacted, the Energy Policy Act of 2005 does establish a demonstration project, however, to

address the issue of upwind pollution. In Section 996, the enacted law requires EPA to work with

state and local officials in a multi-county Western Michigan project area to determine the extent

of ozone and ozone precursor transport, to assess alternatives to achieve compliance with the 8hour ozone standard apart from local controls, and to determine the timeframe in which such

compliance could take place. (Western Michigan is believed to be affected by pollution

originating in the Chicago and Milwaukee metropolitan areas.) EPA is prohibited from imposing

requirements or sanctions that might otherwise apply during the demonstration project.

In addition, on October 7, 2005, the House passed provisions to extend deadlines in areas affected

by upwind pollution in H.R. 3893, a bill whose primary purpose is to facilitate the construction of

new petroleum refineries. The Senate has not taken action on this bill.

Conformity of Transportation Plans and SIPs

A seventh clean air issue considered by the 109th Congress is the conformity of metropolitan area

transportation plans with the Clean Air Act. Under the act, areas that have not attained one or

more of the six National Ambient Air Quality Standards must develop State Implementation Plans

(SIPs) demonstrating how they will reach attainment. A total of 126 areas (474 counties) with a

combined population in excess of 159 million are subject to the SIP requirements for ozone, and

208 counties with a combined population of 88 million are subject to SIP requirements for fine

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particulates. Section 176 of the Clean Air Act prohibits federal agencies from funding projects in

these areas unless they “conform” to the SIPs. Specifically, projects must not “cause or contribute

to any new violation of any standard,” “increase the frequency or severity of any existing

violation,” or “delay timely attainment of any standard.” Because new highways generally lead to

an increase in vehicle miles traveled and related emissions, both the statute and regulations

require that an area’s Transportation Improvement Program (TIP), which identifies major

highway and transit projects an area will undertake, demonstrate conformity each time it is

revised. Prior to enactment of H.R. 3, nonattainment areas were required to revise their TIPs at

least every two years. Highway and transit projects in most nonattainment areas cannot receive

federal funds unless they are part of a conforming TIP.

In the 109th Congress, conformity provisions were included in H.R. 3 (P.L. 109-59), the

transportation bill that the President signed August 10, 2005. As enacted, the law requires less

frequent conformity demonstrations (at least every four years instead of every two years), and

will shorten the planning horizon over which conformity must be demonstrated to 10 years in

many cases, instead of the former requirement of 20 years. The local air pollution control agency

will need to be consulted and public comments solicited if the planning horizon is to be

shortened. The law also establishes a 12-month grace period following a failure to demonstrate

conformity before a lapse would be declared.

Author Contact Information

(name redacted)

Specialist in Environmental Policy

[redacted]@crs.loc.gov, 7-....

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