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Environment, Energy and Transportation Program

Clean Air Newsletter

A Quarterly Review of Legislation and Air Quality Issues

March 2003
Vol. 7 No. 1

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IN THIS ISSUE

FEDERAL ACTIONS

Congressional Multi-Pollutant Legislation
EPA Extends Comment Period on Proposed NSR Rule
EPA Report Cites Gains in Reducing Acid Rain

STATE ACTIONS

States Respond to the NSR Rule Changes
Texas Faces Tough Air Program Funding Decisions
Georgia Revises Low-Sulfur Fuel Rule

COURT ACTIONS

NSR "Stay" Rejected by Federal Court
Supreme Court Will Hear Alaska State's Rights Case

NCSL MEETINGS

STATE LEGISLATION

Summaries of Selected 2003 State Air Quality Bills

FEDERAL ACTIONS

Congressional Multi-Pollutant Legislation

On February 27, Oklahoma Senator James Inhofe, chairman of the Senate Environment and Public Works (EPW) Committee; Ohio Senator George Voinovich; Louisiana Representative Billy Tauzin, chairman of the House Energy and Commerce Committee; and Texas Representative Joe Barton introduced legislation (S. 495 and H.R. 999) to implement the Bush administration's "Clear Skies" initiative. Clear Skies is multi-pollutant legislation that would place caps on sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury emissions. The administration projects that the legislation will reduce power plant emissions of the three pollutants by 70 percent in 15 years. The reductions would be achieved through an emissions trading program that would set national, federally enforceable caps on each pollutant. The caps would be lowered at intervals through 2018.

EPA would allocate pollution allowances to power plants each year. At the end of the year, every power plant would be required to have enough allowances to cover its emissions. Unused allowances could be sold, traded or banked for future use. Power plants that do not have enough allowances to cover their emissions could buy credits from other sources.

There appears to be agreement on both sides that a cap-and-trade program may be the best approach to control multiple pollutants (the existing SO2 cap-and-trade program has reduced acid rain significantly since 1990-see related story in this newsletter). There are, however, several points of contention in the congressional debate. At what levels should the caps be set? How soon should they be implemented? How will any multi-pollutant legislation be integrated with current regulatory requirements under the Clean Air Act? Should carbon dioxide (CO2)-a greenhouse gas-be included in any cap-and-trade program?

Vermont Senator James Jeffords, former chairman and now ranking member of the Senate EPW committee, and Connecticut Senator Joseph Lieberman have introduced the Clean Power Act (S. 366). Both Clear Skies and Clean Power would place a cap on SO2, NOx and mercury emissions. The Jeffords/Lieberman proposal sets stricter caps with shorter compliance deadlines; however, it does not allow trading of mercury allowances, and it includes a cap on CO2 emissions.

During the last Congress, Delaware Senator Tom Carper and Rhode Island Senator Lincoln Chafee, among others, introduced the Clean Air Planning Act (CAP 2002) as a "centrist" multi-pollutant alternative. CAP 2002 proposes a phased-in cap-and-trade program for SO2, NOx, mercury and CO2. The legislation will be reintroduced this year.

EPA Extends Comment Period on Proposed NSR Rule

The U.S. Environmental Protection Agency announced on February 13 that it is extending the public comment period on its proposed New Source Review (NSR) rule change to the definition of what constitutes "routine maintenance, repair and replacement" for purposes of triggering NSR permitting requirements for older power plants and industrial facilities. The comment period is extended for 60 days, from March 3 to May 2. Copies of the proposed rule are available on EPA's Web site at www.epa.gov/nsr.

EPA Report Cites Gains in Reducing Acid Rain

A new U.S. Environmental Protection Agency (EPA) report released on January 29 documents reductions in acid rain as a result of restrictions placed on sulfur dioxide (SO2) emissions under the 1990 Clean Air Act Amendments (CAAA). The CAAA established a cap-and-trade program for SO2, with a goal of reducing SO2 emissions to half of what they were in 1980 by 2010. The SO2 cap-and-trade program is mirrored in the provisions of the Bush administration's "Clear Skies" initiative and other legislation being considered in Congress (see related story in this newsletter) and in state legislatures to reduce multiple pollutants, including SO2, nitrogen oxides (NOx) and, in some proposals, mercury and carbon dioxide (CO2, a greenhouse gas).

The report, Response of Surface Water Chemistry to the Clean Water Act Amendments of 1990, was designed to " ... assess recent changes in surface water chemistry in the northern and eastern U.S., in response to changes in [acid] deposition." It measured results over the period 1990 to 2000. The key questions addressed were, " ... (a) whether the declines in [SO2] emissions translate into reductions in acidic deposition; and (b) whether biologically relevant water chemistry has improved in acid sensitive regions."

The report determined that "sulfate [acid rain] declined significantly" during the period. It found that sulfate concentrations in surface waters likewise "showed significant declines," and that these declines "were consistent with the decline in sulfate in precipitation." The number of "acidic" lakes in New York's Adirondack region, for example, was reduced from 240 (13 percent) to 150 (8 percent). In three of the acid-sensitive regions studied, the report noted that, " ... approximately one-quarter to one-third of formerly acidic surface waters are no longer acidic."

The report concludes that the positive correlation between declines in acid rain and reductions in sulfate concentrations in surface waters " ... is one simple measure of the intended recovery in surface waters and marks a success of the CAAA and efforts by industry in reducing SO2 emissions." One caveat it places on its findings, however, is that, " ... the anticipated decrease in acidity corresponding to the decline in sulfate has been modest."

The report is available on EPA's Web site at www.epa.gov/ord/htm/CAAA-2002-report-2col-rev-4.pdf.

STATE ACTIONS

States Respond to the NSR Rule Changes

The attorneys general in nine northeastern states sued the U.S. Environmental Protection Agency (EPA) over the agency's final New Source Review (NSR) rule on December 31, 2002. They expressed concern about the potential effects of air pollution emitted by industrial plants in the Midwest on air quality within their borders. Led by New York, the states include Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Rhode Island and Vermont. Five other states-California, Delaware, Illinois, Pennsylvania and Wisconsin-subsequently joined the suit.

The suit claims that the changes in the NSR rule are " ... effectively mandatory for all states, potentially undermining any state's ability to adopt stronger clean air protections." It contends that the final regulations " ... give facilities-including those that EPA and the states accuse of violating the law-significant unmonitored discretion to determine when the law applies." In addition, the litigation argues that, " ... the changes are so sweeping and damaging that the Environmental Protection Agency cannot make them without congressional approval."

One month after the initial court filing, the attorneys general in eight other states filed a petition to intervene in support of EPA's final NSR changes. Led by Virginia, the states include Indiana, Kansas, Nebraska, North Dakota, South Carolina, South Dakota and Utah. In filing their motion, the states noted that, "The changes at issue in this case will have a substantial impact on both the states' costs of enforcing the Clean Air Act's requirements and the flexibility that the states enjoy in enforcing those requirements." The brief further contends that the northeastern states' action, if successful, would have "a negative effect" on the other eight states " ... by increasing the costs of enforcement, constricting their enforcement options, and frustrating the achievement of the Act's pollution control goals in a more efficient and cost-effective manner."

For a detailed discussion of EPA's final and proposed NSR rule changes, see NCSL's December 2002 Clean Air Newsletter at www.ncsl.org/programs/esnr/1202cleanair.htm.

Texas Faces Tough Air Program Funding Decisions

The Texas Legislature garnered high praise during its 2001 session for passing Senate Bill 5, which created the Texas Emissions Reduction Plan (TERP). The plan replaced two regulatory programs with a set of incentive-based programs in an attempt to reduce ozone pollution in the Dallas/Fort Worth and Houston/Galveston nonattainment areas. The legislation emphasized revenue from a new $225 inspection fee for out-of-state motor vehicles to fully fund the program. A state court overturned the fee last year as a violation of the U.S. Constitution's interstate commerce and equal protection clauses, however, forcing the Legislature to identify new funding sources for at least $100 million annually to meet all TERP requirements, according to a report Paying for Clean Air: New Funding Options released in February by the Texas House Research Organization.

Senate Bill 5 authorized four government agencies to provide grants and other financial assistance through a series of incentive-based programs:

• A diesel emissions reduction incentive program,

• A motor vehicle purchase or lease program,

• An energy efficiency grant program, and

• A new technology research and development program.

The TERP fund set up to finance these programs contains no general fund revenue. Instead, the fund relies exclusively on:

• A $225 vehicle inspection fee on out-of-state motor vehicles;
• A 10 percent surcharge on truck/tractor or commercial motor vehicle registrations;
• A $10 surcharge on the commercial motor vehicle nspection fee;
• A 1 percent surcharge on the sale, lease or rental of construction equipment; and
• A 2.5 percent surcharge on the sale or lease of heavy, older on-road diesel motor vehicles.

The court decision to throw out the $225 inspection fee led to a revenue shortfall in FY 2002 of nearly $113 million, or 85 percent below projected revenue. If the state fails to cover those costs or does not reinstitute other regulatory programs to comply with federal emission reduction targets, Texas may have to implement a 2:1 emission's offset program (requiring new facilities to reduce emissions by 2 tons for every 1 ton produced, which could have a significant effect on new development in nonattainment areas) or risk losing federal highway funds.

Several proposals have been developed to fund the incentive-based programs. The TERP advisory board has suggested 11 potential new fees or increases in existing fees and surcharges. Representative Warren Chisum, chairman of the TERP advisory board, is considering a statewide environmental impact fee on internal combustion engines that generate more than 50 horsepower. Details on these and other proposed revenue solutions are still being developed.

To obtain a copy of Paying for Clean Air: New Funding Options, contact the Texas House Research Organization at P.O. Box 2910, Austin, Texas 78768-2910, (512) 463-0752.

Georgia Revises Low-Sulfur Fuel Rule

On January 29, Georgia's Board of Natural Resources revised its low-sulfur gasoline rule, which is an integral part of the state's strategy to reduce smog in the metropolitan Atlanta area. The original rule called for a reduction in the sulfur content of gasoline sold in the region from 150 parts per million (ppm) to 30 ppm by May 1 of this year. After a number of gasoline suppliers indicated that they could not provide enough low-sulfur fuel by that date, the board decided to implement a two-stage process-a reduction from 150 ppm to 90 ppm by June 1, and to 30 ppm in January 2004.

COURT ACTIONS

NSR "Stay" Rejected by Federal Court

On March 6, the U.S. Court of Appeals for the District of Columbia turned down the request of 14 states that are seeking an emergency court order to halt the final New Source Review (NSR) rule changes from going into effect on March 3. The states-those that had joined the suit filed against the U.S. Environmental Protection Agency on December 31, 2002 (see related story in this newsletter)-sought the delay on February 6. In rejecting the states' request, the court determined that, " ... petitioners have not satisfied the extremely stringent standards required for a stay pending court review." The court noted, however, that the states' suit would receive expedited review.

Supreme Court Will Hear Alaska State's Rights Case

The U.S. Supreme Court agreed on February 24 to hear a case involving a dispute between the state of Alaska and the U.S. Environmental Protection Agency (EPA) over the issuance of a state air quality permit for a mining operation. The case has potential implications for the degree of flexibility a state may have in implementing its responsibilities under the Clean Air Act.

At issue is a permit that the Alaska Department of Environmental Conservation (DEC) granted to the Red Dog Mine, the world's largest zinc mining operation, three years ago to construct an electricity generation facility at the site. The permit allowed the mine to employ a less expensive system for reducing nitrogen oxides (NOx) emissions than the pollution control technology preferred by EPA. The federal agency vetoed the permit in December 1999, but DEC issued it anyway. In the Ninth Circuit Court of Appeals, the state challenged EPA's authority to overrule a state-issued permit. The court upheld EPA's action last summer. The state subsequently appealed the decision to the Supreme Court.

In opposing the state-issued permit, EPA has noted that, " ... the dispute isn't over the generator but which air pollution controls will be installed on it." The federal agency feels that best available control technology should be used at the site. EPA notes that it has not challenged " ... pollution controls on four other new generators to be installed on the growing mine."

In appealing the case, Alaska Attorney General Gregg Renkes argues that, " We continue to believe that EPA disregarded the provisions by which air permitting is delegated to the state, and exceeded its authority in vetoing the state's permit." Alaska Governor Frank Murkowski has noted that, " ... ten other states have supported the Alaska petition to the Supreme Court, and they will be our allies as the court hears and decides on this important national issue on the rights and responsibilities of each state to manage air quality."

NCSL MEETINGS

The National Conference of State Legislatures' (NCSL) Spring Forum will be held in Boston, Mass., April 24-27, at the Park Plaza Hotel. As part of that meeting, NCSL's Environment and Natural Resources Committee and Energy and Electric Utilities Committee will hold a joint session on April 25 from 9:45-11:15 a.m., to discuss the Bush administration's Clear Skies legislation, and proposed and final changes to the Environmental Protection Agency's New Source Review rule. For additional details about the Spring Forum and the joint committee session, log on to NCSL's Web site at www.ncsl.org.

STATE LEGISLATION

The vast majority of state legislation being considered so far this session concerns alternative fuel vehicles. Of the 68 bills in 21 states summarized in the following table, 42 bills in 15 states address alternative fuel vehicles. The bills typically provide tax credits or other financial incentives for the use of alternative fuel vehicles, or allow them to use high occupancy vehicle lanes without regard to the number of passengers in the vehicle. Other key categories of legislation being considered this session include motor vehicle emissions testing (seven bills in seven states), methyl tertiary butyl ether (MTBE) (five bills in five states), air quality standards (four bills in three states), mercury (two bills in two states), and greenhouse gas emissions (two bills in two states). Hawaii is considering multi-pollutant legislation that would incorporate an emissions trading program similar to legislation enacted in New Hampshire last year and established through rulemaking in Massachusetts in 2001. Multi-pollutant strategies are at the heart of the Bush Administration's "Clear Skies" initiative and other proposed bills being considered by Congress this session (see related story in this newsletter).

Summaries of Selected 2003 State Air Quality Bills

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