The Bush administration recently issued new rules to deal with emissions from coal-fired power plants. The president's 'Clear Skies' initiative is stalled in the Senate. And states are suing the federal government over its new mercury rule. Frank O'Donnell of Clean Air Watch and industry attorney Scott Segal join OnPoint to discuss the new rules and where Clear Skies stands now.
Darren Samuelsohn: Hello and welcome to OnPoint. And I'm Darren Samuelsohn. Joining us today in the E&ETV studios in Washington, are Frank O'Donnell from the Clean Air Watch, the executive director, and Scott Segal, an industry attorney from Bracewell & Patterson, who represents some of the largest coal companies in the country. Gentlemen thanks for being here.
Scott Segal: Good to be here.
Frank O'Donnell: Thank you.
Darren Samuelsohn: We last saw you about six weeks ago and a lot has happened since then. Why don't you guys bring us up to date from your perspectives?
Scott Segal: Well, obviously we had an attempt to mark up, which means to take the final revisions on Clear Skies legislation in front of the Senate Environment and Public Works Committee. That ended in a deadlock, in a 9-to-9 tie, which ties do not go to the runner.
Darren Samuelsohn: No.
Scott Segal: In private session, which means that the bill did not proceed to be reported out of the committee to the floor of the United States Senate for consideration. Obviously my group has always been of the strong belief that a well functioning cap-and-trade program is the best, most cost effective way to make emissions. We think it's predicated on the example of the acid rain program from the 1990 amendments, and we were frankly very disappointed to see the legislation not proceed. That said, we had two rulemakings follow in rapid succession after that. The Clean Air Interstate Rule, which sets up a similar cap-and-trade program for sulfur dioxide and for oxides of nitrogen, for power plant sources in the easternmost 28 states plus the District of Columbia and then the Clean Air Mercury Rule, which similarly sets up a cap-and-trade program for mercury about the equivalent level of reductions, which is to say about a 70 percent reduction by the time of full implementation.
Darren Samuelsohn: OK. You've been reading your Greenwire, good job.
Scott Segal: I have and what a wonderful publication it is.
Frank O'Donnell: And it's a good summary. One of the things we really learned since we were last here, and you may recall I did predict at the time that the Clear Skies bill was not going to make it. So I think I'm ahead on that one.
Darren Samuelsohn: Yeah.
Frank O'Donnell: One of the things we really learned in that time is that we can continue to make progress under the current Clean Air Act. Back six or seven weeks ago there was an awful lot of commotion about, gosh, we've got to rewrite the law if we're going to make any progress. Now what we're seeing is that with the Clean Air Interstate Rule, which is not perfect, got a lot of flaws, but it is a step in the right direction, we're going to see some progress. With the New Source Review settlement with Ohio Edison, under current law, we are going to see progress. So what we're seeing now is we are going to continue to have progress without a total rewrite of the law just to give benefits to some of the powerful campaign contributors. I'd like to grade all of these actions if I could. I think the Senate committee action deserves a solid A. The committee refused to be stampeded and panicked into voting on something when it didn't even have enough information about alternatives. I think folks like Senator Carper really did the country a service by saying, "Wait one minute, I'm not going to vote for this unless I know fully what the impacts will be and what will be the impacts of alternatives." Clean Air Interstate Rule is a passing grade, not a failure, but probably somewhere on the order of a C+, I would say. We're learning all the time of things buried in the weeds about it. It may have some breaks to some of the heavy coal states that we didn't know about until we started reading the fine print. The mercury rule is an absolute F. It's actually an embarrassment to the EPA and I feel sorry for Steve Johnson, the guy who came in, he's a scientist, well thought of, one of the first things out of the gate was they told him, here's what you're going to sign and he had to do it.
Darren Samuelsohn: Clearly plenty to talk about here. Will the Senate, will the House actually move Clear Skies, do you think in the next year that this is going to happen or is it dead?
Scott Segal: I think the first element is the House wants to become, as you might guess, better educated on multi-emissions legislation, so as a result there have been briefings that have been going on, there has certainly been lobbying, traditional lobbying that's been going on and there will be hearing on the Clear Skies bill I believe on the 21st.
Darren Samuelsohn: Of April.
Scott Segal: Of April, right. That's good, we always believe that the more educated folks on Capitol Hill become on the interstate questions the better the resulting legislation will be. So we're glad to see that. In terms of whether or not such legislation will actually move, it depends on a lot of different factors. One of which is simply the availability of sufficient legislative time to consider it. We're moving toward the end of the legislative cycle. Things are clocking down a little bit. If I might take a step back from that, I would say, look, the last time the Clean Air Act was systematically omitted was way back in 1990. In theory, you're supposed to have about a 10-year cycle where you, the verb is "reauthorize" the act, which means really, put it up on the rack take a look at the underside of it, make sure everything is going OK before you approve it for more forward progress. My own personal view is that the time is well, well past due to do that again. I mean if it's a 10 year cycle we're on the --
Darren Samuelsohn: It's the 15th.
Scott Segal: We're on the 14th year.
Darren Samuelsohn: Yeah.
Scott Segal: So a while has gone. I think it's time for us to take a hard look at it. I think one of the areas that we would look at, were we given the opportunity for systematic reform, and of course Chairman Barton, in the Energy and Commerce Committee in the House of Representatives, has indicated his interest in systematic reform of the air act. I think that's something that ought to be encouraged. Clear Skies could be part of that. Clear Skies could be the only manifestation of it or there could be that and other component parts as well.
Darren Samuelsohn: Frank, what are you watching out for, I guess, as the mechanics are looking at the car up on the rack right now? Are you sensing that they're gonna really try and fix the car or are we done?
Frank O'Donnell: Well, if you're talking about the car being the Clean Air Act, I think the car is running pretty well. It can always be improved, obviously, but I think the environmental community's view has long been don't fix it if it isn't broke. We don't think it's broke. If it can be improved I think people are always willing to look at that. One of the real interesting things about the so-called CAIR rule is I think it sort of set a benchmark for how we're going to measure some things in the future. Senator Carper, again, decided this where he said, "We can do better than that." So I think he sent a signal that he's not going to sign onto anything unless it's measurably better than what the CAIR rule was. In terms of things we're looking forward to, or looking out for, there are a lot of things that may be in riders or other attempts to weaken some of the current requirements that we're very concerned about. One of them, for example, is we're hearing reports that some of the oil companies are nosing around suggesting they may have trouble meeting the diesel sulfur requirements. We're very concerned about that because any attempt to weaken those diesel sulfur requirements could weaken efforts to cleanup big trucks, buses, off-road equipment. Now we've got the diesel engine makers and the car companies both writing to EPA saying, we're concerned about this too. So I think that's one thing we're looking out for. Another one deals with the issue of state's rights. There's a real concern that both the diesel engine companies and the car companies may lobby Congress to truncate the rights of states to set separate standards for moving sources of pollution. We think it's very important to keep that authority in current law. So we're concerned about that.
Scott Segal: That's an interesting point and I guess I would say, for your viewers, there is no such thing as a free lunch. Every time the environmental community insists on letting a thousand flowers bloom, with respect to, particularly mobile source requirements, these come at real tangible expenses. We are living right now, for example, through a time when a Balkanized gasoline distribution system has resulted in very expensive gasoline prices. I think probably one of the key reasons, at least if you look at the political polling data, one of the things that's really on the minds of the American public is the expense of energy generally, gasoline specifically. So I'm not suggesting that there, I'm not lending credence to what Frank is saying about an attempt to delay diesel sulfur, but the watchword we should have is on the one hand environmental protection, on the other hand sufficient flexibility that we don't cause untoward consumer protection effects, because believe me there are organizations just like Frank's that deal with consumer issues that are equally as likely to blame industry on the consumer side, if Frank succeeds on the environmental side.
Darren Samuelsohn: You're talking about now mobile sources Frank. You bring this up and Clear Skies has been all about power plants. It's also been about other industries too. The last time Congress really tried to get at this in 1990, they were talking about mobile sources and they were talking about power plants, the focus really has been on power plants this time around. Do you see this opening up much broader and are they gonna try and look at mobile sources?
Frank O'Donnell: Well one of the reasons I bring it up is that there was a rider, another special interest rider, put in an appropriations bill a couple of years ago that called on the National Academy of Sciences to study the issue of should states have the right to set separate standards for mobile sources? The National Academy of Sciences, proceeding right now, they're gonna have a hearing in Boston, I think, later this month or in April.
Darren Samuelsohn: Right.
Frank O'Donnell: And so one of the real concerns at an earlier hearing is that both the car companies and the diesel engine makers said, "There should be new limits put on the authority and the rights of states to set these standards." So we are concerned that that could lead to calls in Congress for reopening the Clean Air Act about mobile sources, potential riders, who knows what kind of mayhem could ensue from that.
Darren Samuelsohn: Let's jump off this really quick and we'll come back to Clean Air in a second. But Stephen Johnson's nomination hearing, his first nomination hearing, is next week in the Senate Environment and Public Works Committee. When he was nominated by President Bush it seemed like environmental groups and Democrats on the Hill were going to galvanize behind him. With the mercury issue that has come out there's maybe some questions now. I mean with The Washington Post story that came out last week concerning the health benefits in the EPA mercury rule. Senators Jeffords, Leahy, Kerry and Boxer have all raised this issue. Do you think Johnson is going to be in a little bit more of a heat, you know more heat now, in terms of his confirmation?
Scott Segal: Well, my own personal view is this. The rulemaking procedure, the rulemaking process that developed the Clean Air Mercury Rule is a long time in the making, dating back not just one EPA administrator, but two EPA administrators.
Darren Samuelsohn: It goes back to Clinton actually.
Scott Segal: That's right. It does, although, parenthetically of course, the Clinton administration never proposed any reductions in mercury from power plants.
Darren Samuelsohn: From power plants. They did from municipal waste centers.
Scott Segal: Correct, correct, but never from power plants, which seems to be the central focus of the issue at this point. I guess I would say I would call on people to judge Steve Johnson on his own merits. He has a long career and a very good career. Also, I don't give up the basis of the hypothesis which is that the Clean Air Mercury Rule is a bad rule, in fact, quite the opposite. Just to respond to something Frank said earlier, I think this is a, it's the first time any government the world, not just in the United States, but in the world has proposed actual mercury limitations on power plants. Placing that in context with the fact that emissions from power plants have been on a declining and declining basis. Placing into further context with the fact that the United States power plants are not the only sources of mercury, far from it, they account for less than 1 percent of the global mercury cycle. So we're addressing a diminishing target and we're addressing it spot-on. I think the Clean Air Mercury Rule has, there's a lot for Steve Johnson and any other responsible official to be proud of in this rule. Yes, it is based on a cap-and-trade program, but frankly, our great experience with the acid rain program is that those emission sources that are the highest have the greatest incentive to make the fastest reductions under a cap-and-trade program. I think everybody should be happy about that.
Darren Samuelsohn: So that's a yes? You think he gets confirmed?
Scott Segal: Oh, yes.
Frank O'Donnell: I think he'll get confirmed too and I think that, I don't know Steve Johnson personally, but I know a lot of people who do and they've all very high on their praise for him as a person, as a diligent guy. I know a lot of the agency staff were encouraged when he got the job too, because they got at least there would be somebody who could relate to their concerns. But having said that, on some of these major issues, the mercury rule is a case in point, the White House is going to make the call as they did on New Source Review when that poor woman Marianne Horinko, was essentially acting EPA administrator and they made her go sign the rule. Sweetheart, here's where you sign your name. Unfortunately, she had to do it and they trotted her out in public and the poor woman looked like she had just been given an enema. I'm afraid Steve Johnson is probably going to have the same thing. Now in terms of those confirmation hearings, I think that, I hope that they will question him very closely about what was the White House role in writing these standards? Because my understanding is that the White House CEQ James Connaughton was very active and essentially saying, "Here's what we want you to do. We don't even want the EPA staff to consider alternatives that would be better." I'll reiterate, I think the rule was an F. It really postpones meaningful reductions many years into the future. As your reporting pointed out, they tried to kind of scam the public by saying it would be a 70 percent reduction by 2018. In reality, it's closer to maybe 50 percent by 2020 and they don't even know really when it'll be 70 percent, maybe 2026. They didn't even measure that far into the future. It's certainly not 70 percent in 2018.
Scott Segal: We should address somewhat this of canard White House influence --
Darren Samuelsohn: This has been an issue going in every EPA administrator nominee in this Bush administration.
Scott Segal: Absolutely. In fact, you know what? I would go back further than the Bush administration. The fact of the matter is, first of all, the White House is the head of the executive branch and the agency is an independent agency within the executive branch. It would be a curious form of government indeed if there was not coordination on the part of the executive branch. I don't think that's what Frank is suggesting, but as a matter of first principles, major policy initiatives should have both buy in and support from the White House. We would be very surprised if they did not. The second point is, is that one need only go is far back as one of the previous guests on this very show, the lovely and talented Carol Browner.
Darren Samuelsohn: OK.
Scott Segal: Who herself was, what? The legislative director, and for those of you know the inside lingo of Capitol Hill, that's a significant position in a congressional office. For who? Senator Al Gore. The fact of the matter was that at that time Al Gore had two important principles, former congressional staffers of his, one he installed at the CEQ, which is a White House office and the other he installed at EPA. There was a high degree of coordination between those two. In fact, I would daresay to you, perhaps because of the interest level of the vice president in the Clinton administration, there was probably more direction and directed leadership from the White House in the last administration than there is the current administration.
Darren Samuelsohn: Frank do you want to respond on the Clinton administration?
Frank O'Donnell: Well, I think that Scott is making a good point in that very important decisions do get the White House's attention. One thing we learned in the Clinton administration was when Carol Browner was trying to revise and update the national air quality standards for smog and soot, it literally went to the president to make the call. We heard this very definitively. Carol Browner and OMB both went in together and said to the president, "Here's what I, Carol Browner, want to do. Here's what OMB wants to do. What do you want to do?" The president sided with Carol Browner. I think we see a diametrically opposite view here in this administration where when push comes to shove the White House is going to side with the polluting industries rather than the public health considerations. The mercury rule is really a case in point.
Darren Samuelsohn: Let's quickly switch to the Clean Air Interstate Rule, which sets pollution limits in the East. We haven't heard yet any lawsuits. This thing came out a couple of weeks ago, but do you think industry is going to sue?
Scott Segal: Well, I think I said to you before, there are two kinds of lawsuits that you sometimes find from industry, one a systematic challenge to a rule and the other one a challenge of very specific details. I couldn't comment on the latter category, the very specific details, like somebody thinks a facility ought to be in one state when it's counted in another state or something like that. Those are sort of housekeeping petitions that are always possible, who knows? With respect to the large-scale systematic rejection of the rule, systematic rejection of the administrative procedure act or the Clean Air Act, all I can say is that I have heard nothing, which leads me to believe that that is a major initiative that industry is likely to undertake. We would anticipate that there will be litigation, but I don't really think it's going to come from industry.
Darren Samuelsohn: No question on like is it legal that EPA did the Clean Air Interstate Rule?
Scott Segal: Yeah, at least if, I have not heard those arguments proffered. It may be that there are others that would say things like that, but I certainly haven't heard anything like that.
Darren Samuelsohn: Frank?
Frank O'Donnell: I've heard nothing about litigation. As we've gotten into the weeds of the rule we're learning more about it. We've learned recently for example that the proposal got changed in the final rule to grant more of what they call allocations for nitrogen oxides to some of the coal heavy states. It looks like maybe a political favor or two was put into the rule for that purpose. Whether that's going to be something that'll get some states to consider suing or not, I don't know. We do know, as I pointed out, it's a step in the right direction, but it does leave, literally, tens of millions of people still would air quality problems 10, 15, 20 years from now because it is going to take another 15 or 20 years for that thing to play out. So it's not going as far as we should go, whether that means we're going to see big lawsuits or not though, I don't know.
Darren Samuelsohn: I haven't heard anything.
Scott Segal: Darren, two things. One on timing. The substantial record from the last major cap-and-trade program, the acid rain program, was that you begin to have trades as soon as the trading system is put in place. So even though the ultimate deadline may be quite further down and the ultimate time of implementation may be quite further down the road, we begin to have trades in emissions reductions very much so in the near-term. In fact, Carol Browner's report on the success of the acid rain program filed in 1999 showed that something like 30 to 35 percent of the emissions reductions came well in advance of even the first deadline. So as far as timing is concerned I'm pretty confident we're going to see some major questions or some major reductions soon. One other item, interesting thing about the politics of the Clean Air Interstate Rule. There were folks who bellied up to the bar at the Senate Environment and Public Works Committee and voted against the Clear Skies rule, even though the bill covers the entire United States and therefore has more reductions than the Clean Air Interstate Rule. And why did they vote against it? Because they felt, some, felt that it should have included for example, carbon dioxide. Yet some of those same individuals broadly support the Clean Air Interstate Rule, which clearly does not include carbon dioxide. Even though opponents of the current administration believe the current Clean Air Act could cover carbon dioxide, the CAIR rule does not. So it just seems to me that when it comes to legislation and possible legislative victories for this administration, there are folks who will, like the old movie title says, "Say Anything" in order to undermine the current legislation. Even though they will support a more truncated approach to addressing the same problems as long as it comes out in regulatory form.
Darren Samuelsohn: Let me just toss one last question at you guys. In the last six weeks we've had two major Clean Air Act enforcement settlements with utility companies, Ohio Edison and Illinois Power. Tom Sansonetti, the head of the Justice Department has said that the Clean Air Interstate Rule will bring more settlements like that. There are several cases against some of the largest companies, some of your clients, Duke, Southern Company, still out at planning --
Scott Segal: Fine corporations.
Darren Samuelsohn: Do you think that these companies are going to settle their cases, and Frank your thoughts on that too.
Scott Segal: Well, as a general rule, anytime a company settles a case it has to do with specific facts of that case and what the company evaluates to be specifically in its corporate best interest. So it's hard to say that a settlement in one area causes a settlement in another area to occur. As a general proposition about these cases though, these cases, these settlements were very much supported and celebrated by the environmental community, but look what it took. It took six to seven years of litigation to get these cases done, to get these settlements in place and then prior to that it took even more administrative process. So it took an inordinate amount of time, by contrast. With great certainty and a specific time frame and a mechanism for early trades any of the multi-emissions trading programs would appear to, I think, to an unbiased observer to be a much better way to get reductions than waiting around for these little ships to come in, when they only do so infrequently.
Frank O'Donnell: Well let me talk about a couple of things in response to that. One is that even if you take a couple of years to have the case play out in court we're going to see the emission reductions, for example from the Ohio Edison case, by 2012. So even if you add five years on to that, we're going to have it all done about 12 years. We've been battling over Clear Skies for three and Congress already, and it'll take 20 years to see that happen. So under the New Source Review enforcement we're actually going to see cleaner air much quicker. Secondly, industry is always bellyaching about we need certainty, we need certainty, we need certainty. I think it would be great if Mr. Segal's clients would suddenly say, "All right, we're willing to get the certainty. We're going to settle now. Have Southern Company, have American Electric Power, not one of his clients, have Synergy announce they're going to settle. They'll get the certainty. The public will get clean air. We'll all be winners. I hope that's going to happen.
Scott Segal: You know, phase one of those CAIR reductions by the way is in 2009. So actually we do get substantial reductions sooner or actually on a very similar time schedule to the time schedule that's articulated in these various settlements.
Darren Samuelsohn: Clearly this quite a bit to talk about and we will have you guys on again. That's all the time we have for you here today. This is Darren Samuelsohn and OnPoint. We'll see you again next time for another edition.
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