[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

EPA ENFORCEMENT PRIORITIES AND PRACTICES

=======================================================================

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER

OF THE

COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

JUNE 6, 2012

__________

Serial No. 112-147

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COMMITTEE ON ENERGY AND COMMERCE

FRED UPTON, Michigan
Chairman

JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina GENE GREEN, Texas
Vice Chairman DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma LOIS CAPPS, California
TIM MURPHY, Pennsylvania MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California TAMMY BALDWIN, Wisconsin
CHARLES F. BASS, New Hampshire MIKE ROSS, Arkansas
PHIL GINGREY, Georgia JIM MATHESON, Utah
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin
LEONARD LANCE, New Jersey Islands
BILL CASSIDY, Louisiana KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

7_____

Subcommittee on Energy and Power

ED WHITFIELD, Kentucky
Chairman
JOHN SULLIVAN, Oklahoma BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois KATHY CASTOR, Florida
GREG WALDEN, Oregon JOHN P. SARBANES, Maryland
LEE TERRY, Nebraska JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington LOIS CAPPS, California
PETE OLSON, Texas MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado HENRY A. WAXMAN, California (ex
MIKE POMPEO, Kansas officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

(ii)

C O N T E N T S

----------
Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 3
Hon. John Sullivan, a Representative in Congress from the State
of Oklahoma, opening statement................................. 5
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 5
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 6
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 7
Prepared statement........................................... 9
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 11
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 11

Witnesses

Barry T. Smitherman, Chairman, Texas Railroad Commission......... 13
Prepared statement........................................... 16
Bryan T. Shaw, Chairman, Texas Commission on Environmental
Quality........................................................ 26
Prepared statement........................................... 28
Robert J. Sullivan, Jr., Chairman, Oklahoma Independent Petroleum
Association, and Owner, Sullivan and Company, LLC.............. 69
Prepared statement........................................... 71
Joel A. Mintz, Professor of Law, Nova Southeastern University.... 80
Prepared statement........................................... 82
Stephen B. Etsitty, Executive Director, Navajo Nation
Environmental Protection Agency................................ 85
Prepared statement........................................... 87
Allen Short, General Manager, Modesto Irrigation District........ 93
Prepared statement........................................... 95

Submitted Material

Statement, dated May 2012, of Union of Concerned Scientists,
``Health Professionals' Open Letter to Policy Makers in Support
of the Clean Air Act and the Environmental Protection Agency,''
submitted by Mr. Rush.......................................... 152
Article, dated May 31, 2012, ``Fact Check: Oil stats belie tough
enforcement talk,'' Associated Press, submitted by Mr. Rush.... 163

EPA ENFORCEMENT PRIORITIES AND PRACTICES

----------

WEDNESDAY, JUNE 6, 2012

House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:05 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Sullivan,
Shimkus, Burgess, Bilbray, Scalise, Olson, McKinley, Gardner,
Pompeo, Griffith, Barton, Upton (ex officio), Rush, Green,
Gonzalez, and Waxman (ex officio).
Staff present: Gary Andres, Staff Director; Charlotte
Baker, Press Secretary; Michael Beckerman, Deputy Staff
Director; Anita Bradley, Senior Policy Advisor to Chairman
Emeritus; Maryam Brown, Chief Counsel, Energy and Power;
Allison Busbee, Legislative Clerk; Patrick Currier, Counsel,
Energy and Power; Cory Hicks, Policy Coordinator, Energy and
Power; Heidi King, Chief Economist; Ben Lieberman, Counsel,
Energy and Power; Mary Neumayr, Senior Energy Counsel; Andrew
Powaleny, Deputy Press Secretary; Krista Rosenthall, Counsel to
Chairman Emeritus; Chris Sarley, Policy Coordinator,
Environment and Economy; Michael Aylward, Democratic
Professional Staff Member; Jeff Baran, Democratic Senior
Counsel; Phil Barnett, Democratic Staff Director; Alison
Cassady, Democratic Senior Professional Staff Member; Greg
Dotson, Democratic Energy and Environment Staff Director; and
Caitlin Haberman, Democratic Policy Analyst.
Mr. Whitfield. The hearing will now come to order.

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

Today's hearing is on EPA enforcement priorities and
practices. I would note that we had expected Dr. Al Armendariz
to testify here today. He is the former Region 6 Administrator,
and we were disappointed that he chose to cancel yesterday
afternoon. We do intend to explore the reasons for his failure
to appear.
As I said, the title of today's hearing is ``EPA
Enforcement Priorities and Practices,'' and I hope that at
least one result of this hearing will be when it is over that
Administrator Jackson and some others at EPA will think more
about working in a cooperative attitude and spirit with the
entities and the States that they deal with rather than an
adversarial attitude and spirit.
Now, why do I say that? Well, I am going to give you some
examples. Number one, Mr. Armendariz himself. We all know the
statement that he made before a city council meeting in Texas
in which he said, ``When the Romans went into a community, they
would find five citizens and they would crucify them, and after
that they wouldn't have any trouble,'' and he said ``That is
what we need to do in the oil and gas industry.'' That is not
the type of attitude we need from public employees.
In the Range Resources case, which is another example of
the approach to enforcement that concerns us, in that case EPA
issued an emergency compliance order against a drilling company
based on false accusations, even though Texas regulators warned
EPA it was premature and the facts were not known. In the end,
EPA did withdraw the order, but not until after the company was
forced to spend millions of dollars to defend itself against
EPA's false claims.
EPA's efforts relating to the Texas Flexible Air Permits
provide another example of aggressive and unprecedented
regulatory actions. This permitting program had been in effect
since President Clinton's administration and was working very
well to improve the State's air quality. EPA took upon itself
to federalize this program and compel more than 100 major
facilities to go through a process EPA called deflexing.
It isn't just Congressional Republicans who think that EPA
is overreaching. An increasing number of Federal judges do
also. In the recent Sackett decision, the Supreme Court
unanimously rejected EPA's efforts to deny due process to
landowners. One of the judges wrote that ``The position taken
in this case by the Federal Government would have put the
property rights of ordinary Americans entirely at the mercy of
Environmental Protection Agency employees.'' He further said
that ``In a Nation that values due process, not to mention
private property, such treatment is unthinkable.'' In another
case, the Luminant case in the Fifth Circuit Court of Appeals,
that court rejected EPA's attempts and said that EPA's
disapproval was based on ``purported nonconformity with three
extra-statutory standards that the EPA had created itself out
of whole cloth.''
In the recent Spruce Mine case decision, another Federal
judge invalidated an attempt by EPA to rescind a coal mining
permit. The court called EPA's rationale ``magical thinking''
and ``a stunning power for an agency to arrogate to itself.''
And in the Avenal case last year, a court rejected EPA's
claim it was not bound by the Clean Air Act's statutory
requirement to make a permitting decision within 1 year. The
court said, ``The EPA's self-serving misinterpretation of
Congress's mandate is too clever by half and it is an obvious
effort to protect its regulatory process at the expense of
Congress's clear intention.'' And then the court went on to
say, ``Put simply, that dog won't hunt.''
So we believe, many of us believe, EPA is out of control.
They are more interested in being an adversary than working in
a cooperative spirit. And so that is what we hope to explore in
today's hearing.
[The prepared statement of Mr. Whitfield follows:]

[GRAPHIC] [TIFF OMITTED] T9849.001

[GRAPHIC] [TIFF OMITTED] T9849.002

Mr. Whitfield. At this time I would like to yield 2 minutes
to the gentleman from Oklahoma, Mr. Sullivan.

OPENING STATEMENT OF HON. JOHN SULLIVAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OKLAHOMA

Mr. Sullivan. Thank you, Chairman Whitfield. Thank you for
holding this important hearing today to discuss the enforcement
practices and priorities of the U.S. Environmental Protection
Agency. Today we will be taking a critical look at some of
these enforcement practices in EPA Region 6, which includes my
State of Oklahoma.
I am pleased to welcome my good friend Bob Sullivan, who is
chairman of the Oklahoma Independent Petroleum Association. He
is with us to discuss the importance of fossil fuels to our
Nation and to share his real-life business experiences with EPA
Region 6's enforcement practices on oil and gas producers.
Thank you for your advocacy on oil and gas issues at both the
State and Federal level.
I am extremely disappointed that former EPA Region 6
director Dr. Al Armendariz decided to cancel his appearance at
today's hearing at the last minute, and I think I know why. The
American people deserve an honest explanation for his comment
saying that the EPA should crucify and make examples out of oil
and gas companies, which employ over 9 million Americans. This
type of regulatory bullying and abuse underscores the problems
we face with EPA's enforcement culture.
Like many Americans, I am pleased that Mr. Armendariz
resigned after publicly expressing such hostility and political
prejudice toward oil and gas companies, an industry that
employs over 300,00 Oklahomans in my State. This blatant
political bias is completely unacceptable behavior from a now
former government official charged with regulating this
critical industry.
The Obama administration's refusal to fire Mr. Armendariz
is proof that they are out of touch with the American people
when it comes to developing a national energy policy. While I
supported Mr. Armendariz's decision to resign, I also challenge
the EPA to go even further to root out this troubling trend of
hostility towards oil and gas production in order to achieve
our goal of powering our Nation with affordable and stable
sources of American-made energy.
Mr. Chairman, I yield back the balance of my time.
Mr. Whitfield. At this time I recognize the ranking member,
Mr. Rush, for his opening statement.

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINIOIS

Mr. Rush. Thank you, Mr. Chairman.
Mr. Chairman, I am really somewhat--not somewhat, I am very
disturbed at this hearing. Since the beginning of the 112th
Congress, by my count, we've had over 30 Energy and Power
Subcommittee and joint committee hearings--over 30--and we have
held over a dozen subcommittee and full committee markups, and
we have had nine bills that originated from this subcommittee
that have been voted on by the full House. Yet from all that
time and all that effort and all the taxpayers' dollars that
are going into all this, this subcommittee has produced exactly
one bill--let me repeat: one bill, the Pipeline Safety
Reauthorization Act--that has actually become law.
Now, here we go again. Mr. Chairman, when will the other
side understand that the EPA stands for the Environmental
Protection Agency and not Every Problem in America Agency. EPA
is the Environmental Protection Agency, not the Every Problem
in America Agency. While attacks on the EPA and the Clean Air
Act may appease some of the more extreme constituency that the
majority side represents, most American people, particularly
those who are facing economic crises in their lives and their
families and their homes and in their neighborhoods, they want
to see us working in a bipartisan manner to address critical
issues such as access to jobs, clean air, clean water, less
dependency on foreign oil and enhanced energy efficiency
measures, and an increased reliance on cleaner and renewable
energy sources for the future. Those are the issues they want
us to be working on, not some comment that some unemployed or
some ex-member of the EPA, who is no longer in government, not
someone who is no longer a part of the Federal Government. They
don't want us to focus on some stupid statement that he made
some time ago. They want us to focus on the issues that are
before them right now and the issues that they are concerned
about.
But here we are, cameras all over the place, showing off,
showing how angry we are about the statement that was taken out
of context of an ex-government employee, a former EPA staffer
who is going on with his life and won't be here--I am pretty
sure he won't be here ever again. But why are we wasting time?
You know, you want an opportunity to profile and parade before
the cameras, you want an opportunity to try to embarrass the
Obama administration? Well, I think we are the ones who should
be embarrassed. But we know that not one constructive thing is
going to happen today, not one thing. Not one scintilla of
solution for the American people is going to come out of the
time that we are wasting here today.
Mr. Chairman, with all due respect to the witnesses who are
here, I believe our time would be better served by working in a
bipartisan manner to enact policy that some day may actually
move this Nation and its energy agenda forward.
Mr. Chairman, I thank you and I want to yield the balance
of my time to my friend from Texas.

OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS

Mr. Green. Thank you, Mr. Chairman, and I want to thank our
ranking member for yielding me time and holding this hearing.
I want to first welcome two Texans to our committee, our
Chair of our Texas Railroad Commission that actually regulates
oil and gas in Texas, Barry Smitherman. I have known Barry's
family for decades, a good family, a Houston family, although
hill country now. And also the Chair of our Texas Commission on
Environmental Quality, Bryan Shaw.
I regret the reason we are holding this hearing today, and
I had planned to praise Dr. Armendariz for agreeing to testify
since he resigned, but canceling at the last minute is
disrespectful to our committee, and some of us who actually
remember a subcommittee hearing we had in Houston that our
Regional Administrator couldn't appear but he was literally two
blocks from our hearing there at South Texas College of Law. I
am disappointed he chose not to do it but I want to thank our
other panelists for being here, especially our Texas witnesses.
The oil and gas industry has been and will continue to be a
vital economic engine for our country, and EPA officials should
not use negative language against the oil and gas industry
without cause. While Dr. Armendariz's comments may have been
meant as an analogy, if you take them in context of actions
taken by EPA Region 6, they reveal a troubling trend of
hostility toward oil and gas production literally in Texas,
Oklahoma and Louisiana and New Mexico that produces a
significant amount of the product our country needs.
I am sure many of you saw the Associated Press article last
by Dana Cappiello. Dana ran an extensive analysis of
enforcement data over the past decade and found that EPA went
after producers more often under the Bush than under this
administration. I think that is fine and good, but I also think
it speaks volumes about the great care our companies are
putting into ensuring their exploration and production
activities do no harm to the environment, given the number of
wells had actually increased in recent years. However, the AP
numbers didn't reflect violation notices and emergency orders
which have been a true problem within this current
administration. Take, for example, what famously happened in
Parker County. The EPA preempted the Railroad Commission,
issued an emergency administrative order alleging hydraulic
fracking had made the water unsafe when the data did not
support the EPA's claim. Ms. Cappiello's numbers also don't
reflect Dr. Armendariz's choosing to attend that conference
literally two blocks away from our Energy and Commerce Energy
Subcommittee hearing when we were discussing EPA's decision to
disapprove the Texas Flexible Air Permit program. The hearing
and the forum were just blocks away, and these instances tell a
very different story and I regret that Dr. Armendariz is not
here to explain his rationale.
Mr. Chairman, I hope this hearing is constructive and we
can move forward, not only in Region 6 but our effort in our
committee to produce the energy that our country needs, and I
yield back my time.
Mr. Whitfield. Thank you.
At this I recognize the chairman of the committee, Mr.
Upton of Michigan, for 5 minutes.

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN

Mr. Upton. Well, thank you, Mr. Chairman.
Let us be honest: Under this administration's EPA, the
extreme has become routine, and that is why, when video
surfaced of Dr. Armendariz talking about his ``crucify''
enforcement strategy, it really rang a bell with those of us in
Congress who oversee the agency, not to mention those who have
to deal with the economic consequences back home. His words
provided a window into a pervasive mindset driving a long list
of problematic enforcement and regulatory actions by the
agency.
To understand that mindset, we sought to hear from him
directly. In fact, earlier this week he confirmed that his
testimony would arrive on time on Sunday. He volunteered to
come. After all, it was his comments that so clearly embodied
the hostile enforcement policy that we have seen in action for
the last couple of years. And unfortunately, late yesterday
afternoon, very late yesterday afternoon, an attorney
representing him contacted the committee staff to notify us
that despite his earlier agreement to come, he was no longer
willing to testify. Well, we would like to know why, and why,
several weeks after he had agreed to testify, did he retain
counsel and then withdraw? The EPA, did they interfere with
this witness? We don't know. But I have in my hand a couple
copies of letters that we intend to send today to the EPA and
to Dr. Armendariz to ask those questions. Congress and the
American people deserve answers about the administration's
policies and practices, and we intend to get them. But even
without his appearance today, we are going to scrutinize the
agency's actions by hearing directly from those on the
receiving end of their enforcement.
Over and over, we have seen EPA treating job-creating
energy companies as if they were the enemy. We have seen new
regulations that defy any credible reading of the authority
delegated to the agency. EPA's attitude toward the private
sector is troublesome enough, but its treatment of non-Federal
levels of government is hardly any better, and I would remind
everyone that the very first section of the Clean Air Act
states that ``air pollution control at its source is the
primary responsibility of states and local governments.''
So today we are going to hear from those State, local and
tribal officials whose longstanding working relationship with
the Federal EPA has deteriorated considerably under this
administration.
The Clean Air Act has effectively balanced economic growth
and environmental improvement for decades, and I am concerned
that EPA has gotten far away from that balance.
I yield my time now to Mr. Barton.
[The prepared statement of Mr. Upton follows:]

[GRAPHIC] [TIFF OMITTED] T9849.003

[GRAPHIC] [TIFF OMITTED] T9849.004

OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS

Mr. Barton. Thank you, Chairman Whitfield and Ranking
Member Rush for holding this hearing.
I, like Chairman Upton, am disappointed but not surprised
that former Regional Administrator Armendariz has chosen not to
testify before this subcommittee. As my friend Mr. Green just
pointed out, at a field hearing down in Houston, the former
Regional Administrator was blocks away, was formally invited to
testify and participate at that hearing and again chose not to
do so.
The Congress sets the rules, and the administration
enforces them. We have a good set of environmental laws on the
books. We expect President Obama and his appointees to enforce
those rules in an even and fair-handed fashion. In the case of
Region 6 Administrator Armendariz, he was not a fair umpire. He
had a preconceived mindset, viewed himself more as an
executioner than as a fair umpire, as some of his comments have
shown. As soon as he became the Region 6 administrator, EPA
withdrew a longstanding support of the Texas Flexible Air
Permit program that was initiated under President Clinton. The
Obama administration through Regional Administrator Armendariz
removed that. In the cases of Range Resources, which dealt with
the issue of hydraulic fracturing, again, former Regional
Administrator Armendariz came into office saying that he wanted
to eliminate hydraulic fracturing. He thought he had a case in
Range Resources and moved to an enforcement action even when
the then-chairman of the Railroad Commission of Texas sent him
an email saying that that was premature and that the facts did
not justify that. In Idaho just recently, the Obama
administration went against a family called the Sacketts on a
wetlands issue. Again, Mr. Chairman, Congress sets the rules
and the administration enforces them. This Obama administration
in the case of the EPA doesn't want to play by the rules. They
want to set their own rules, and in some cases literally try to
put industry and businesses out of business.
With that, I yield to my good friend from Denton County,
Dr. Burgess.
Mr. Whitfield. The gentleman is out of time.
At this time I recognize the gentleman from California, Mr.
Waxman, for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Waxman. Thank you, Mr. Chairman.
In May 2010, then-EPA Regional Administrator Al Armendariz
was in DISH, Texas, talking to citizens concerned about oil and
gas pollution. When he started describing his philosophy of
enforcement, he used a poor analogy involving Romans and
crucifixion. Everyone agrees that it was an inappropriate
comment.
But those who oppose strong enforcement of the Nation's
environmental laws have exaggerated what was said in order to
make absurd attacks on EPA and the Obama administration. They
claim that Dr. Armendariz intended to take enforcement actions
against innocent companies and that his comments are
representative of EPA's overall enforcement philosophy.
This smear attack ignores most of what Dr. Armendariz said
that day, and it ignores the facts. Dr. Armendariz has
apologized for his controversial comments, and he has resigned.
He has made it very clear that those comments were an
inaccurate way to describe EPA's enforcement efforts. And it is
important to realize that no enforcement action has been taken
in DISH, Texas.
EPA Administrator Lisa Jackson and the White House have
reiterated that the comments do not reflect any EPA policies or
the agency's actions. Despite these clear statements, EPA's
critics claim that the controversial Armendariz comments must
represent EPA's true enforcement policy. This is just more of
the same fact-free, anti-EPA rhetoric from the Republicans.
Here are the facts. The Clean Air Act, Clean Water Act,
Safe Drinking Water Act and other cornerstone environmental
laws allow States to implement and administer the statutes'
requirements. It is EPA's job to ensure that the States
implement nationally consistent programs that meet Federal
standards.
The States do not always meet these expectations. In fact,
the EPA IG recently found that ``State enforcement programs
frequently do not meet national goals and states do not always
take necessary enforcement actions. State enforcement programs
are underperforming. ... noncompliance is high and the level of
enforcement is low.'' And in these situations, EPA has the
authority to step in to take the action needed to enforce the
law.
For decades, these enforcement decisions have been made by
career EPA enforcement professionals, not political appointees.
That has not changed under this administration.
Since the agency was formed during the Nixon
administration, EPA has employed a philosophy of deterrence.
EPA punishes violations of the law fairly and openly in order
to deter others from breaking the law. And EPA focuses its
limited enforcement resources on the highest priorities that
represent the most serious pollution problems. There is nothing
unique about this approach. In fact, I would be surprised if we
could find a well-run law enforcement agency or civil
enforcement program in the country that worked differently.
The data tells the story. I have charts. The first chart
shows the number of EPA enforcement actions nationwide over the
last 11 years. As you can see, the number of enforcement
actions during the first 3 years of the Obama administration
has actually dropped off slightly compared with the Bush
administration years. I see no evidence of an overzealous
enforcement policy here.
Let us look at just EPA Region 6. That is the region that
Dr. Armendariz led. If his controversial remarks reflected a
radical enforcement policy, then surely we would find evidence
of that in Region 6. But as you can see from the chart, that is
simply not the case. Again, the number of civil enforcement
actions is actually lower during the past 3 years than during
the Bush years.
The third chart shows that total civil penalties collected
under the Obama administration are not much different than
under the previous administration. You can see that the totals
go up and down each year depending on when bigger cases are
resolved. In fact, the average amount of civil penalties
collected during the Bush administration is actually slightly
higher than so far under the Obama administration.
Those are the facts. One comment from 2 years ago cannot
change the facts. Environmental laws that protect our air and
water are important to the health and wellbeing of Americans.
The only way to ensure those protections are real is to enforce
them. Career employees at EPA have been doing that enforcement
work for 40 years, and they should keep doing so to protect
American families from toxic chemicals and other pollutants.
Thank you, Mr. Chairman.
Mr. Whitfield. Thank you.
That concludes the opening statements today, so I want to
welcome once again the first panel, the only panel, and on our
panel today we have with us Dr. Bryan Shaw, who is Chairman of
the Texas Commission on Environmental Quality. We have Barry
Smitherman, who is Chairman of the Texas Railroad Commission.
We have Mr. Robert Sullivan, who is Chairman of the Oklahoma
Independent Petroleum Association. We have Dr. Joel Mintz, who
is a Professor of Law at Nova Scotia University. We have Mr.
Stephen Etsitty, who is the Executive Director of the Navajo
Nation Environmental Protection Agency. And we have Mr. Allen
Short, who is the General Manager of the Modesto Irrigation
District in California.
So welcome. We look forward to all of your testimony
because you all are the ones that work on a daily basis with
the Federal EPA, and we look forward to your insights and
comments.
Chairman Smitherman, we will call on you first for a 5-
minute opening statement.

STATEMENTS OF BARRY T. SMITHERMAN, CHAIRMAN, TEXAS RAILROAD
COMMISSION; BRYAN W. SHAW, CHAIRMAN, TEXAS COMMISSION ON
ENVIRONMENTAL QUALITY; ROBERT J. SULLIVAN, JR., CHAIRMAN,
OKLAHOMA INDEPENDENT PETROLEUM ASSOCIATION, AND OWNER, SULLIVAN
AND COMPANY, LLC; JOEL A. MINTZ, PROFESSOR OF LAW, NOVA
SOUTHEASTERN UNIVERSITY; STEPHEN B. ETSITTY, EXECUTIVE
DIRECTOR, NAVAJO NATION ENVIRONMENTAL PROTECTION AGENCY; AND
ALLEN SHORT, GENERAL MANAGER, MODESTO IRRIGATION DISTRICT

STATEMENT OF BARRY T. SMITHERMAN

Mr. Smitherman. Thank you, Mr. Chairman, Mr. Vice Chairman,
members of the committee, especially my friends from Texas. I
am Barry Smitherman. I am the Chairman of the Texas Railroad
Commission. Thank you for the opportunity to provide my
perspective on the enforcement priorities and practices of the
Environmental Protection Agency.
As the Chairman of the Railroad Commission, I and my
Railroad Commission colleagues are responsible for overseeing
the exploration and production of oil, natural gas and lignite
coal in Texas. Texas is the Nation's largest producer of oil
and natural gas, producing 413 million barrels of oil and 7.4
trillion cubic feet of natural gas in 2011. That translates
into 1.1 million barrels of oil a day and about 20 bcf of
natural gas a day. These numbers continue to increase in 2012.
In March, we were producing 1.35 million barrels of crude oil a
day. That is more than the United States presently imports from
Venezuela. We are also the home of 49 percent of all the land-
based rigs in America.
This energy production supports 2 million jobs in Texas and
is responsible for a quarter of the State's economy. The
average oil and gas job in Texas pays about twice what the
average non-oil and gas job pays, and these jobs, of course,
are vital to the State's economic wellbeing as we continue to
be a leader in energy production.
The Railroad Commission, Mr. Chairman, has effectively
regulated the energy industry in Texas since 1919. The State
has maintained a predictable regulatory environment allowing
for prolific yet responsible development, and this successful
track record is partially due to the scientists, engineers and
policymakers that are closest to the variables being regulated
and they are most familiar with all of the elements at play.
State regulation of these industries is critical because in
my estimation, it is impossible for blanket Federal regulations
to account for the unique circumstances of each State. As has
been highlighted several times earlier this morning, recently
the EPA has been insinuating itself into areas that have
historically been the purview of the States. Let me talk more
about the Range Resources case, which was mentioned.
On December 7, 2010, the EPA issued an emergency order
against Range Resources for allegedly contaminating a
residential water well near Fort Worth. This order was issued
despite the fact that the Railroad Commission staff had already
advised the EPA that the Commission's investigation was ongoing
and that no final conclusions had been reached. Furthermore, we
now know that the EPA issued the order even though the EPA did
not evaluate the underground geology in the area, did no
research to determine possible pathways for the migration of
the methane, and was in disagreement with many scientists. The
Commission had already secured the voluntary cooperation from
the operator, and we were moving quickly to investigate the
situation.
The Commission concluded in March of 2011 that Range
Resources' fracking activities were not responsible for the
contamination of well water. However, the EPA continued with
its investigation for another 12 months. Range Resources was
forced to spend over $4 million defending itself against
unfounded and unprecedented attacks, and then in March of 2012,
in a one-paragraph letter, the EPA dropped its emergency
endangerment order against the company.
Unfortunately, Mr. Chairman, this is not an isolated
incident. We have seen cases in Pavilion, Wyoming, and in
Dimock, Pennsylvania, where the EPA has also accused oil and
gas operators of groundwater contamination from fracking
without sufficient evidence to justify those accusations. I
hope, Mr. Chairman, that the result of this hearing today is
that EPA will begin to listen and work with local regulators
going forward, regulators that know best the circumstances, the
underground geology and the facts present in those States.
Thank you very much.
[The prepared statement of Mr. Smitherman follows:]

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Mr. Whitfield. Thank you, Mr. Smitherman.
At this time, Mr. Shaw, you are recognized for 5 minutes.

STATEMENT OF BRYAN W. SHAW

Mr. Shaw. Thank you. Good morning, Chairman Whitfield,
Ranking Member Rush. I am Dr. Bryan Shaw, the Chairman of the
Texas Commission on Environmental Quality, and I appreciate the
opportunity to visit with you today about many issues ongoing
with the relationship between EPA and specifically the State of
Texas.
I am not interested and I am not here specifically to pile
on to Dr. Armendariz and his time as Region 6 Administrator.
Instead, I think it is important that we recognize the pattern
and the philosophy that his comments represented that seemed to
be consistent with what we have seen through recent EPA
actions, specifically the enforcement activity as well as
regulation, and not just suggesting that the number of
regulations or enforcement cases went up, but the failure to
have a just and reasonable and fair regulatory process and
enforcement policy, which is demonstrated not only in the
examples that you have heard cited today but also what we have
seen in other rulemakings such as the Flexible Permits program,
which you discussed earlier, whereby EPA did not apply science
and the law to overturn Texas's program but instead wishes to
impose what they desire short of the Clean Air Act and Federal
regulations. And to that end, Dr. Armendariz, after Texas
having gone through the process of trying to explain how the
Flexible Permits program did indeed meet the requirements of
the Clean Air Act and met those concerns that they published in
the Federal Register, the response that he said--I believe Gina
McCarthy was in the room at the time--was that EPA was not
interested and did not want to have a Flexible Permit program,
a very similar type of philosophy in that EPA was not
interested in making sure that the State program met Federal
requirements or even that we were achieving our environmental
goals, but instead wanting to make sure that their politically
driven policies were in place.
And that is why I am here today, hoping that we can, as
Chairman Smitherman talked, encourage EPA to work with us as
partners to recognize that relationship that we should have
between State and Federal government so that we can follow. Our
goal at TCEQ, to have sensible regulations that address real
environmental risk while encouraging economic growth. We do
that with regulations that are based on science and compliance
with State and Federal statutes, and in every case that we
disagree with EPA and have a lawsuit on many of those, it is
because of their actions not being consistent with that
principle of sound science, reasonable approach where we follow
the law, and common sense applied to that.
I mentioned the Flexible Permits program as a prime example
of their failure to follow that process. And in fact, Dr.
Armendariz was one of the key leaders in unraveling that
program, which was in place for 15 years, which was one that
led to numerous environmental benefits. And when asked to
produce a single instance where the Flexible Permits program
demonstrated a failure to follow Federal law or even the
requirement to reduce those emissions, that did not occur. EPA
stood by their desire, not the demonstration of any concerns in
the Federal Register or Clean Air Act that the program didn't
meet Federal requirements, but instead they didn't ``want'' the
Flexible Permit program. As a result, 65 Flexible Permits in
Texas have been ``deflexed,'' the term that was used, and EPA
basically uses that to refer to those that have SIP-approved
permits.
There are 36 permit applications that are pending in-house,
and we have not seen additional flex permit holders that have
made commitments to deflex, but their applications are still
pending. The deflex process has been an incredible waste of
money and resources for both the permit holders and the
environmental agency with no environmental benefit; to be
clear, no environmental benefit. To date, not one deflexing
permit action has revealed a circumvention and emissions
violation that EPA claimed were being hidden by those flexible
permits. No additional emission limitations, additional
controls required or additional conditions have been added to
any of those permits as a result of EPA's actions.
I would like next to move to another example of this
failure to follow the common practice in the rules and
regulations in place. It is our UIC, Underground Injection
Control program, as it relates to uranium mining. And EPA has
deviated from what has been a 30-year practice of complying
largely with their requirement that is mandated in Federal
statutes that they approve or deny within 90 days of submission
of requests for aquifer exemption to allow in situ uranium
mining. We have two cases whereby EPA has created two new
requirements, modeling requirements, that are not captured in
the statutes nor are they captured in EPA's guidance documents.
We submitted letters to EPA recommending approval of those
aquifers for exemption. They sent back letters requesting
modeling, which is something that has never been required. They
want modeling for 75 years' life and to demonstrate that no
drinking water will be impacted, and yet they can't demonstrate
where our approved program has ever led to failure in the
drinking water process. So I am hopeful that we can find and
move toward a more productive relationship with EPA.
Thank you.
[The prepared statement of Mr. Shaw follows:]

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Mr. Whitfield. Thank you.
Mr. Sullivan, you are recognized for 5 minutes.

STATEMENT OF ROBERT J. SULLIVAN, JR.

Mr. Sullivan. Thank you, Chairman Whitfield and Ranking
Member Rush and other members of the subcommittee. I very much
appreciate this opportunity.
I would also like to thank my Congressman, Vice Chairman
Sullivan, for his leadership on crude oil and natural gas
issues, and for the record, although I share his last name, we
are not related, a fact for which I am sure Congressman
Sullivan is continually grateful.
I am Chairman of the Oklahoma Independent Petroleum
Association and the Owner of Sullivan and Company LLC, a 54-
year-old family-owned independent producer of crude oil and
natural gas. I have 25 employees, roughly half in the field and
half in the office.
Like my peer OIPA members, Sullivan and Company explores
for new domestic oil and natural gas reserves using modern
finding, drilling and production techniques. In addition to our
work on private lands, Sullivan and Company operates
extensively on Indian lands.
I have submitted my written testimony for the record and
will take only a few minutes to address a few key points.
First, the personal agendas of EPA officials impact EPA
priorities and practices and result in overzealous enforcement
actions. Wrongful EPA actions in the Parker County, Texas,
Pavilion, Wyoming, and Dimock, Pennsylvania, instances show the
limits of Federal credibility when it comes to regulating oil
and gas operations. We are troubled by the enforcement
philosophy of EPA as expressed by Mr. Armendariz, but we are
not surprised. Mr. Armendariz is a highly motivated
environmental activist who pursued his anti-fossil fuel agenda
through a powerful EPA post. He used the bogeyman of hydraulic
fracturing, a safe and proven technology, to achieve his goals.
With no scientific basis to fault hydraulic fracturing,
activists and administration officials have become fear
mongers. Their strategy is to create anxiety over oil and
natural gas development, criticize State groundwater and
drinking water protections as insufficient, federalize oil and
gas regulations, and use that process to slow development by
increasing the cost of regulatory compliance.
Federalizing exploration and production rules will kill
jobs, curb domestic energy production and harm America. The
Federal Government has neither the expertise nor the
objectivity to fulfill such a charge. The regulation of oil and
gas activities must reside with the States. Every State is
geologically distinct. There is no one-size-fits-all solution
or protection program.
Second, the victims of corrupted EPA practices and science
are policymakers of both major parties. Consumers and small oil
and natural gas businesses like mine, nationwide that is 18,000
companies, averaging about a dozen employees each and operating
in 32 States. We independent producers have no refining or
gasoline station operations. We sell our commodities, which are
crude oil and natural gas, at whatever price the global market
says they are worth. We are not Big Oil.
But together, independent producers drill 95 percent of all
the wells in the United States and account for 68 percent of
the total U.S. production. That is made up of roughly 82
percent of U.S. natural gas production and more than 54 percent
of domestic oil production. On shore in America, we
independents are responsible for over 3 percent of the total
U.S. workforce, more than 4 million American jobs, more than
$579 billion in total economic activity, and 4 percent of the
U.S. GDP. And we pay a lot of taxes, royalties, rents to
Federal, State and local governments.
In 2010, independent producers generated $131 billion for
Federal and State coffers. For every $1 million upstream
capital expenditures by independent producers, that results in
$5.1 million in overall contribution to the U.S. GDP and six
direct jobs and 33 total upstream jobs, so there is 5:1
leverage there.
For each of the past 4 years, the President has asked
Congress to prevent small producers like me from deducting
normal business expenses at tax time. He and his executive
agencies have also rejected the Keystone XL pipeline, which
independent producers need to move oil more efficiently to
market from Montana and North Dakota. They have opted for
expanded New Source Performance and Emissions Standards and
mandatory greenhouse gas reporting rules that will cost our
industry hundreds of millions of dollars. They have proposed a
set of duplicative and unnecessary Federal rules for hydraulic
fracturing on public and Indian lands that will delay permits
and reduce royalty payments to tribes and Federal Government.
They have pressed for landmark legislation to raise the price
of all fossil fuels in order to help create a market for
alternative energy sources that do not exist in commercial
volumes or are not economically feasible today.
Finally, recent abuses by the EPA clearly show that
Congress must exercise more oversight of the agency. Regional
EPA Administrators have too much power and at the very least
should be subject to Senate confirmation.
I think you for the privilege of testifying, Mr. Chairman.
[The prepared statement of Mr. Sullivan follows:]

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Mr. Whitfield. Well, thank you.
Dr. Mintz, when I introduced you, I made the mistake of
saying Nova Scotia University, and it is Nova Southeastern
University where you are a Professor of Law, so you are
recognized for 5 minutes.

STATEMENT OF JOEL A. MINTZ

Mr. Mintz. Thank you, sir. We are a distance from Nova
Scotia, actually. It is not a problem.
Mr. Chairman, Mr. Ranking Member and members of the
subcommittee, my name is Joel A. Mintz. I am a Professor of Law
at Nova Southeastern University in Fort Lauderdale, Florida.
Since 1983, a major focus of my academic research and writing
has been enforcement work of EPA. I have written three books
and a number of book chapters and law review articles that
touch on EPA enforcement. My most recent book, Enforcement at
the EPA: High Stakes and Hard Choices, revised edition, which I
actually have a copy of here for purposes of shameless self-
promotion, was published in April by the University of Texas
Press. That work, based on 190 personal interviews with
government officials, as well as extensive documentary
research, recounts the history of EPA's enforcement program
from its beginnings in the early 1970s through January 2009.
Since 2009, I have also conducted a number of informal
telephone interviews with enforcement personnel at EPA and the
Department of Justice to get a continuing sense of the major
EPA enforcement developments and trends during the Obama
administration.
My testimony before you today is intended to put the
enforcement work of EPA during the Obama administration to date
into context and historical perspective rather than to discuss
any individual cases or regulations. My main point is simple
and straightforward. For the past 3 \1/2\ years, EPA's approach
to enforcement has employed the same overall philosophy and
strategy that has characterized EPA enforcement since the early
1970s. Rather than being uniquely overzealous or draconian, EPA
enforcement in the Obama years has followed longstanding
patterns established at EPA well before 2009.
From the agency's beginnings in the Nixon administration to
the present day, EPA enforcement, with only a few brief periods
of exception, has been based on a theory of deterrence. Under
this deterrence theory, which is scarcely unique to EPA,
violations of the law are to be detected promptly, and fairly
and appropriately punished, as a way of deterring the
individual violator and others similarly situated from
violating the law in the future. The theory assumes that
individuals and firms are rational economic actors who will
comply with the law when the probability of detection is great
enough, and the penalties are high enough, that it becomes
economically irrational for them to violate the law. Of course,
the constitutional rights of all citizens must be strictly
protected during this process, both because it is the right
thing to do and because enforcement cases will not succeed in
the courts where citizens' rights are violated.
Throughout EPA's history, with only minor exceptions,
decisions regarding which industries and companies should be
the focus of enforcement actions, and whether those actions
should be administrative, civil judicial, or criminal in
nature, have been made by career enforcement professionals and
not by political appointees. From the George H.W. Bush
administration through the Obama administration to date, for
approximately a third of its enforcement work, EPA's
enforcement staff has relied on a national priority approach
that targets particular industries and national or
international firms for intensive, comprehensive enforcement
actions. This targeting approach is a neutral, non-political
procedure that employs statistical analysis of data to give
enforcement priority to industries and firms which have the
worst compliance records, and whose environmental releases do
the most harm to the health of Americans.
EPA's own annual enforcement reports provide statistical
evidence that EPA enforcement under Obama has not been uniquely
harsh. They reveal, for example, that during the eight years of
the George W. Bush administration, the civil penalties assessed
against environmental law violators averaged $117 million per
year. In contrast, during the first 3 years of the Obama
administration, EPA enforcement resulted in the assessment of a
slightly lower amount of civil penalties: $115 million a year.
Similarly, EPA enforcement actions against the oil and gas
industry declined during the Obama administration as compared
with the preceding Presidency. EPA brought only 87 enforcement
actions against the industry in 2011, while it initiated 224
such actions in 2002. Although there may well be good
explanations for these declines, they do support the overall
conclusions of my historical research: EPA's enforcement work
during the Obama period has been similar in nature to the work
it did in nearly every administration since the agency was
established, regardless of the party affiliation of the
President.
Thank you.
[The prepared statement of Mr. Mintz follows:]

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Mr. Whitfield. Thank you, Dr. Mintz.
Mr. Etsitty, you are recognized for 5 minutes.

STATEMENT OF STEPHEN B. ETSITTY

Mr. Etsitty. Good morning, Chairman Whitfield, Ranking
Member Rush and members of the committee. On behalf of Navajo
Nation President Ben Shelly, we extend our appreciation for the
opportunity to present our views this morning.
I will focus on EPA's tribal consultation responsibilities
and the Regional Haze Rule BART determination processes and our
experiences working with Region 6 and EPA headquarters.
The Navajo Nation is a coal-based resource tribe with two
large coal-fired power plants and associated mines on our
lands, and the 1,800-megawatt San Juan Generating Station and
San Juan Mine located just off the reservation in New Mexico.
Both the San Juan plant and the San Juan mine are located
outside the jurisdiction of the Navajo Nation but the plant and
the mine have positive economic impact on the Nation and on the
regional economy. Because of the Nation's substantial coal
reserves and jobs in the energy sector, the Regional Haze Rule
and other EPA rules will have long-reaching impacts on the
Nation's sovereignty including our ability to independently
develop our natural resource economy and provide economic
security for our tribal members.
Recent rulemaking under the Regional Haze Rule by EPA
imposed excessively stringent and expensive BART, or selective
catalytic reduction control technology, on the San Juan plant
and jeopardizes the continued viability of the power plant. In
this regard, the EPA has a requirement to engage in meaningful
consultation with the Navajo Nation in the development of
regulations with tribal implications as recognized in Executive
Order 13175 and EPA's tribal consultation policy section 4.
However, EPA has failed to do so.
The standard for determining whether a regulation has
tribal implications is whether a proposed regulation has
``substantial direct effects on or more Indian tribes.'' The
Federal Implementation Plan for the San Juan plant will have
substantial direct effects on the Navajo Nation, San Juan
plant, the San Juan Mine, subcontractors and seasonal workers.
As the Nation stated in its comments on the proposed FIP for
San Juan, EPA provides a facile conclusion that it does not
have direct tribal implications because the FIP does not impose
federally enforceable emission limits on any source located on
tribal lands and neither imposes substantial direct compliance
costs on tribal government nor preempts a tribal law.
However, the EPA failed to consider potential regional
economic impacts and impacts on the local Indian tribes
including the Navajo Nation and the inevitable impacts if San
Juan Generating Station and its mine were forced to close as a
result of the imposition of costly SCR technology.
EPA failed to conduct an accurate analysis of the potential
social costs to the Navajo people. Should this final FIP result
in closure of the San Juan plant and mine, hundreds of jobs
will be lost, not only in the coal and power industry on the
Nation but in the service support industry and public sector as
well. A conservative estimate is that 318 Navajo jobs would be
lost. This includes highly paid jobs that are about 2.7 times
the average Navajo Nation household income of $20,000. This
lost revenue would reduce spending by about $25 million per
year and a loss of nearly $1 million annually in sales tax
receipts. An increase in the number of unemployed on the Navajo
Nation caused by the closure of the San Juan plant or the San
Juan Mine would result in increased demands on social services
provided by the Navajo Nation and other government agencies at
a time when other EPA rulemakings are threatening to diminish
the Nation's coffers such as BART determinations at the Four
Corners Power Plant and the Navajo Generating Station, which
are located on the reservation. These increased demands for
services would necessitate that the Navajo Nation divert an
increased percentage of its already stressed budget to provide
for the social needs of the unemployed. This would divert
funding that could be spent on economic development and thereby
stunt future economic growth on the Navajo Nation.
The Nation supports the substantive goals of the Clean Air
Act and the goal of the Regional Haze Rule to provide
visibility or to improve visibility in class I areas. However,
implementation by EPA of the Regional Haze Rule and the BART
process must be done with due analysis and accommodation of the
critical economic interests of the Navajo Nation and the Navajo
people and the continued operation of power plants in and near
Navajo Indian Country. EPA has an obligation, a requirement to
meaningfully consult with the Nation for rulemakings directly
affecting the Nation before proposing a draft rule and after
promulgating a final rule. That was not done for the proposed
FIP for San Juan or for the advanced notice of proposed
rulemaking for the Four Corners Power Plant and the Navajo
Generating Station, and EPA therefore violated its consultation
obligations and responsibilities to the Nation.
The Nation nonetheless remains hopeful that EPA will
continue to improve its consultation practices in accordance
with their own stated policies and to complete tribal
consultation on the San Juan FIP and to work with EPA in a true
government-to-government relationship.
Thank you.
[The prepared statement of Mr. Etsitty follows:]

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Mr. Whitfield. Thank you very much.
Mr. Short, you are recognized for 5 minutes.

STATEMENT OF ALLEN SHORT

Mr. Short. Thank you, Mr. Chairman and Ranking Member Rush
and members of the Subcommittee on Energy and Power. Good
morning. My name is Allen Short. I am the General Manager of
the Modesto Irrigation District located in California's Central
Valley. Thank you for the opportunity to speak with you about
EPA's enforcement as what you just have heard, the Regional
Haze Rule at the San Juan Generating Station. The coal-fired
plant, as you now know, is located in New Mexico, specifically
in EPA Region 6. I am here because the San Juan station is a
significant source of electric power for hundreds of thousands
of customers throughout California.
Modesto Irrigation District is a local, publicly owned
utility that is in partnership with the city of Santa Clara,
the city of Redding, which form the M-S-R Joint Power Agency.
We serve roughly 210,000 customers in California, and the M-S-R
owns a mix of generating resources including a share of the
Generating Station Unit 4, which provides 150 megawatts to M-S-
R members. The station is also an important source of
electricity for the Southern California Public Power Authority,
SCPPA, whose members serve almost 5 million customers. SCPPA
members own a part of San Juan as well. Collectively,
California public utilities own 24-1/2 percent of the San Juan
station. The principal owner and operator of the San Juan
station is Public Service Company of NM, PNM, an investor-owned
utility.
My testimony is on behalf of MID, M-S-R and SCPPA. Under
the Clean Air Act regional haze provision, each State and EPA
are required to develop and implement plans to help restore
natural visibility at 156 national parks and wilderness areas
by the year 2064. To comply, the State of New Mexico proposed a
plan for the generation facility that would meet the goals and
objectives of the rule with an emissions technology which would
cost approximately $77 million. Unfortunately, EPA rejected the
State plan for the San Juan Generating Station and has
established a Federal plant that requires installation of
emissions control technology costing somewhere between $750 and
$805 million, and this is based upon installation bids from
firms specializing in this technology. The bids are more than
twice EPA's cost estimate of $345 million. Although EPA's
approach would cost 10 times more than the State plan, it would
remove only slightly more haze, an improvement that would be
virtually imperceptible to the human eye.
It is important to understand the Regional Haze Standards
are not health-based standards. They are about visibility only.
This is why cost-effectiveness and reasonableness are the main
factors for selecting the regional haze emissions technology.
By grossly underestimating the real cost of its plan, EPA also
overstates the cost-effectiveness. M-S-R and SCPPA share a cost
for EPA plan to its customer will range from $272 to $2,250 per
annual per year. This is also on top of the many stringent
mandates that California has imposed upon electric utilities.
Environmental organizations want the Federal plan to be
implemented on a timetable that would require shutting down all
or parts of the station during installation and could affect
the reliability of the regional transmission grid.
Environmental groups have also asked the California Energy
Commission to prevent M-S-R and SCPPA from paying for regional
haze compliance at San Juan. San Juan owners must begin the
Federal plan immediately. New Mexico Governor Suzanna Martinez
has asked EPA to stay implementation of the plan so that the
State and EPA and PNM can work towards an agreeable alternative
to the State and Federal plans. We strongly support the
Governor's effort to sit down and talk with EPA.
California public utilities are willing to do their share
to reduce regional haze through cost-effective and reasonable
improvements to the station but our customers should not have
to pay for the extreme cost of technologies that produce only
marginal benefits as compared to similarly effective
alternatives. Again, this falls down to the customer who will
actually pay for it. It will have an effect on the California
economy, jobs and home foreclosures.
Thank you.
[The prepared statement of Mr. Short follows:]

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Mr. Whitfield. Well, thank you, and thank all of you for
your testimony. I really wish we had maybe a full day for this
hearing because there are so many issues here, and one thing
that all of us recognize, that when you deal with EPA
regulations and enforcement actions, it is very complex and it
is not easy to discuss in a readily comprehensible way.
Now, of the people on this first panel, how many of you
have worked, as a part of the responsibility of the job you
have, have worked closely with Region 6 on issues affecting you
in one way or another? Would you raise your hand if you have
worked quite frequently with Region 6? OK. Everyone raised
their hand except Dr. Mintz.
Now, when I go to Kentucky and I talk to farmers and I talk
to coal miners and I talk to natural gas producers, they tell
me that they genuinely believe that there is a bias against
fossil fuel at EPA. So for those of you who have worked with
them on a regular basis, would you tell me your personal
belief? Do you believe honestly that there is a bias against
fossil fuel within the Region 6 EPA? Mr. Smitherman?
Mr. Smitherman. Mr. Chairman, I do believe there is a bias.
I think it is reflected in the onslaught of regulations we have
seen coming out of this administration first directed at coal.
Effectively, now, you cannot build a new coal plant in America.
And now more increasingly directed against oil and natural gas.
Mr. Whitfield. OK. Mr. Shaw?
Mr. Shaw. Yes, Mr. Chairman, thank you. I do believe there
is a bias. It is demonstrated not only in the enforcement
action we have talked about today but many of the regulatory
actions that have been coming forth, which EPA seems to go to
great lengths to attempt to justify outside of the normal
process without following their own rules and regulations. And
quite frankly, it follows the examples we talked about with Dr.
Armendariz' comments and others on EPA's philosophy.
Mr. Whitfield. Mr. Sullivan?
Mr. Sullivan. Yes, Mr. Chairman, I do think there is a
bias, and I think it comes from the top. Whenever you have a
President once a week out there hammering against fossil fuels,
it is natural for those in the various agencies to be very
aggressive in promulgating that, and I definitely see a bias in
their actions and in their words.
Mr. Whitfield. Mr. Etsitty?
Mr. Etsitty. Thank you for the question, Mr. Chairman. I
believe there is a difference, and I wouldn't characterize it
as a bias, and I would compare our work with EPA under other
offices other than the Office of Air and Radiation, especially
when we talk about our consultation processes. We have had
successful consultation and worked on many issues with EPA,
Region 6 and Region 9, but under the Clean Air Act issues, it
has been very difficult.
Mr. Whitfield. So it has been different under the Clean Air
Act?
Mr. Etsitty. Yes.
Mr. Whitfield. And I think you made the statement that they
were not following their consultation obligations under the
Clean Air Act?
Mr. Etsitty. That is correct.
Mr. Whitfield. Mr. Short?
Mr. Short. Thank you, Mr. Chairman, and I would say that
there certainly is a preference towards natural gas versus coal
in dealing with EPA Region 6, but let me just say from that
perspective, you know, you guys have great jobs in producing
legislation and EPA regulates, and my job is to comply as best
I can with the best technology and at the most cost-effective
and reasonable approach. So even though there may be a
preference towards natural gas, I still need to deal in the
world that is given to me today, which is, I have got to
comply.
Mr. Whitfield. And you import electricity from New Mexico,
the Four Corners Generating Station and San Juan station? Do
you import electricity from those areas?
Mr. Short. That is correct. We bring electricity in from
the Four Corners as does SCPPA. It comes in through lines that
we own with our friends and our partners and then it comes all
the way up to Central Valley into Modesto and then over to
Santa Clara and up to Redding.
Mr. Whitfield. And there is no question in your mind that
EPA and environmental groups are trying to require that you not
buy electricity produced from coal in New Mexico. Is that
correct?
Mr. Short. Yes, there is a law in California. It is called
1368 which really prohibits the investment in new coal-fired
facilities and also prohibits the investment in upgrading
existing coal-fired facilities to extend the life of those
facilities. So there is a move to eliminate coal in California.
Mr. Whitfield. And you said that all of this really comes
from the effort to reduce regional haze in that area. Is that
correct?
Mr. Short. Well, California has a different set of rules.
They established that over the last couple years in preventing
coal from coming into California, or coal-fired electricity
from coming into California. The regional haze issue is another
concern that we have, which is layered on top of the California
mandates.
Mr. Whitfield. And you know, every time--we have had lots
of hearings with EPA, and every time they come up here, on
every regulation, they talk about the necessity for these
regulations because of health. Now, you said that in the
regional haze issue that health has nothing to do with that. Is
that correct?
Mr. Short. It is a visibility issue, not a health issue.
Mr. Whitfield. My time is expired. Thank you very much.
At this time I would recognize the gentleman from Illinois,
Mr. Rush, for 5 minutes.
Mr. Rush. I want to thank you, Mr. Chairman.
Mr. Chairman, you asked a question of how many of the
witnesses have been involved personally with the EPA. I would
like to ask the witnesses, how many of the witnesses present at
the witness table today were personally invited to testify at
this hearing by the chairman or the chairman's staff? Please
raise your hands. How many were personally invited by the
chairman or the chairman's staff to testify at the hearing
today? Let me ask it again. How many of the witnesses were
personally invited by the chairman, Mr. Whitfield, or the
chairman's staff? My point is that five of the six witnesses
were invited, but the fact that five of them are representing
industry, that is the point that I am trying to make and that
they were invited. Only one witness is a Democratic witness. We
would like to have had more, absolutely.
Now, I wanted to ask Dr. Mintz, the Associated Press
examined 10 years of data on the EPA's enforcement of
noncompliance by oil and gas producers, and according to their
independent analysis, the number of enforcement cases against
oil and gas companies in Region 5 and also across the Nation
has been lower every year under the Obama administration than
any year under the Bush administration. In fact, the EPA
reported that nationally, the number of enforcement actions
against oil and gas producers dropped by 61 percent over the
last decade from 224 in 2002 to 87 in the year 2011. And the AP
notes that this decline has occurred even though the number of
wells has increased, and EPA has listed energy extraction as a
priority enforcement area.
Dr. Mintz, are you familiar with this AP analysis? And if
so, would you concur with the findings of this independent and
unaffiliated analysis?
Mr. Mintz. Yes, sir, I am familiar with it, and to my
knowledge, it is correct. From what I understand, EPA's
statistics actually cover a somewhat broader range than just
the oil and gas industry, I have been informed, but
nonetheless, it is, I think, substantially correct and I have
no reason to doubt their figures.
Mr. Rush. As you can see, Dr. Mintz, and as I tried to
point out, there are no witnesses today from the public health
sector. All industry witnesses today, or five of the six are
industry witnesses today. They are from industry, none from the
public health sector. They are all from industry. As a former
chief attorney with the U.S. Environmental Protection Agency in
Chicago and here in Washington, I wonder if you might briefly
speak about some of the health impacts associated with air and
water pollution that EPA and the Clean Air Act were initially
designed to address.
Mr. Mintz. Certainly, sir. I don't pretend to be an expert
on public health issues or epidemiology but just as a matter of
general knowledge from my work at EPA, I know that the Clean
Air Act was aimed at preventing or lowering the incidence of
lung diseases. They are related to a number of times of
emissions of pollutants, for example, sulfur dioxide, small
particulate matter and other kinds of emissions that have an
unhealthy impact.
Mr. Rush. I want to thank you.
And Mr. Chairman, I do have an open letter from 350 health
professionals to policymakers in support of the Clean Air Act
and the EPA that was submitted to my office, and I would like
to submit both the AP report and also the open letter to
policymakers. I would like to submit that for the record.
Mr. Whitfield. Without objection.
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Mr. Whitfield. And I might say Mr. Smitherman, Mr. Shaw,
and Mr. Etsitty have responsibility for health issues. I am
positive of that, because you enforce the Clean Air Act under
your State Implementation Plan.
OK. At this time I recognize the gentleman from Texas, Mr.
Barton.
Mr. Barton. Thank you, Mr. Chairman.
A couple of editorial comments before I ask my question.
All witnesses are invited by the majority staff in consultation
with the minority and the minority staff, and I wasn't involved
in the witness decisions but my understanding is that if the
minority had wanted additional witnesses, I won't say they
would have all been accommodated but certainly an effort would
have been made to accommodate some of them, and I know from
personal interaction with Mr. Whitfield that he is very
accommodating to members when they have specific requests.
Mr. Rush. Will the gentleman yield?
Mr. Barton. As long as it doesn't come out of my time.
Mr. Rush. I don't want to take your time, but I just want
to note that at one of these hearings, we need to have public
health officials, and it would have been real good if we had
invited public health officials.
Mr. Barton. The Chairman of the Texas Railroad Commission,
the Chairman of the Texas Commission on Environmental Quality,
I believe we have a chief from the Navajo Nation. I believe the
gentleman from Oklahoma has statewide responsibility. So to say
that those do not represent public health would I think be
somewhat disingenuous. That is their function, especially the
Texas Commission on Environmental Quality. Its sole function is
to protect the public health. They are appointed by the
Governor on the advice and consent of the Texas legislature and
I would assume similarly in the Navajo Nation and the State of
Oklahoma. So they represent----
Mr. Rush. I don't have the time but if you would yield just
another 2 seconds----
Mr. Barton. I hope that I don't have--I have some really
good questions and I hope----
Mr. Rush. I just want to say to my friend from Texas that
you are a very accomplished man and I really respect you a lot,
and you have a lot of responsibility as a former chairman of
this committee, but I would not want you to testify as a public
health expert before this very committee. We need public health
experts, not people who have some kind of tangential
relationship with public health issues.
Mr. Barton. Mr. Chairman, I would ask unanimous consent
that my clock be reset to 5 minutes.
Mr. Whitfield. Mr. Rush insists that that be the case.
Mr. Barton. Thank you.
Mr. Shaw, you are the Chairman of the Texas Council on
Environmental Quality. Is that not correct?
Mr. Shaw. That is correct. I am the Chairman of the Texas
Commission on Environmental Quality.
Mr. Barton. Is Texas air quality improving, about the same,
or getting worse?
Mr. Shaw. It is improving, and consistently and fairly
dramatically improving.
Mr. Barton. When President Obama and his Regional
Administrator decided to throw out the Texas Flexible
Permitting program several years ago, was that because there
was statistical evidence that air quality in Texas was
disintegrating?
Mr. Shaw. No, sir. There were allegations that somehow the
playing field was unlevel, that we were somehow achieving
financial success because we weren't upholding the
environmental rules, yet the data clearly show we were making
continuing environmental improvement.
Mr. Barton. Mr. Smitherman, you are the Chairman of the
Texas Railroad Commission. Is that correct?
Mr. Smitherman. That is correct, sir.
Mr. Barton. And your agency has regulatory authority over
oil and gas operations in the State of Texas. Is that not
correct?
Mr. Smitherman. Yes, we regulate oil and gas, lignite coal
development. We protect correlative rights, and we have a
mission to protect and prevent waste.
Mr. Barton. And under both Federal and State law, it is
your agency that would regulate the practice that is generally
called hydraulic fracturing. Is that not correct?
Mr. Smitherman. That is correct. The fracking process, all
of which happens underground, is overseen and monitored by our
agency.
Mr. Barton. And when in December--well, actually in August
of 2010--a local homeowner in Parker County, a Mr. Lipinski,
made a complaint to your agency that he had natural gas in his
well water and he asked your agency to investigate that. Is
that not correct?
Mr. Smitherman. Yes, sir.
Mr. Barton. And within days, your agency sent experts to
conduct that investigation. Is that not correct?
Mr. Smitherman. That is correct.
Mr. Barton. And your investigators forwarded their findings
to the Region 6 Office of EPA. Is that not correct?
Mr. Smitherman. Yes, sir.
Mr. Barton. And when the Region 6 Administrator decided to
issue a press release, give a television interview and render
an enforcement, an emergency enforcement order, against Range
Resources, is it also not correct that your predecessor,
Chairman Coreo, sent an email to Mr. Armendariz saying that
that was premature?
Mr. Smitherman. Correct.
Mr. Barton. And in spite of that, they went ahead and
issued this enforcement order, emergency enforcement order?
Mr. Smitherman. In addition to that, former Chairman
Barton, the language used by Mr. Armendariz said that houses
could explode if they did not go forward with the enforcement
order.
Mr. Barton. Now, as it turned out, as the Texas Railroad
Commission conducted its investigation, they had a hearing and
invited the EPA and the homeowner to participate. And it is my
understanding that neither the EPA nor the homeowner
participated in that hearing. Is that correct?
Mr. Smitherman. That is correct.
Mr. Barton. But in that hearing, evidence was presented
that showed beyond a shadow of a doubt that the natural gas in
the well water was not because of hydraulic fracturing. Now, I
want to read a statement. This statement is from the pleading
of Range Resources. I am going to read it and I want you to
tell me if you agree that this is factually correct, and I
quote, ``The evidence in the record is overwhelming and
conclusive. The Range gas wells in the Barnett shale are not
the source of the gas in the Lipinski or Haley water wells or
in any other area wells, and hydraulic fracturing and all other
oil and gas activities have not in any way contributed to the
contamination of freshwater in this area. All of the evidence,
historic, geologic, microseismic, engineering, gas
fingerprinting and water well sampling, establishes that the
source of natural gas in the Lipinski well and in the other
area water wells is not the Barnett shale but is shallow gas-
bearing strong formation. The migration of natural gas from the
strong formation to freshwater aquifers is not the result of
oil and gas activities but has occurred over decades through a
regional natural geologic connection exacerbated by increased
pumping from the aquifer and by water wells drilled into the
strong.'' Do you agree with that statement?
Mr. Smitherman. That is correct. That was the conclusion,
the gas was naturally occurring. The fingerprinting of it did
not match the gas being produced in the Barnett shale.
Mr. Barton. My time is expired, Mr. Chairman, but what I
want to state is, we have strong environmental laws. We
expected those laws to be enforced strongly. We expect them
also to be enforced fairly. In this case, the Obama
administration and the Region 6 Administrator, Mr. Armendariz,
had a preconceived conclusion to shut down hydraulic
fracturing. They took this case, the Range Resources case. They
thought they had the smoking gun. They found out they did not,
and yet they continue in a public way to try to castigate
hydraulic fracturing. That to me is inexcusable.
Mr. Whitfield. The gentleman's time is expired.
At this time I recognize the gentleman from Texas, Mr.
Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
Following up my colleague and good friend from Texas,
sometimes you have your preconceived conclusion but the facts
don't always get there. I have a number of questions I want to
get to, but for State regulators, we are all aware of how the
EPA got ahead of itself in Parker County, Pavilion, Wyoming,
and Dimock, Pennsylvania. Are any of you aware of other
instances, maybe not as notable, where the EPA seemed to get
ahead of the data and issue a notice of violation or emergency
order and just to retract it later?
Mr. Smitherman. Congressman Green, I would say these
particular three cases have a fact pattern that is so similar
that that is why they are routinely identified as being
egregious cases, and those are the ones that we focused on the
most.
Mr. Green. But if there are other examples, obviously--
because these are three separate regions.
Mr. Smitherman. Right.
Mr. Green. It is not just Region 6, it is ours in Texas and
Pennsylvania, which has had some great success in producing
natural gas.
Mr. Smitherman. But the Parker County one was the first,
and the others followed behind that.
Mr. Green. Any other from any of our State regulators?
My next question is for the Chair of the TCEQ. Mr. Shaw, in
your opening statement, you mentioned that the AP analysis that
focused on EPA enforcement actions on upstream production. Have
you noticed any noticeable trend in enforcement actions on
downstream production?
Mr. Shaw. Well, let me say, Congressman Green, first of
all, because of the relationship I have, I am not able to talk
about enforcement actions within the State because they may
involve me making an ultimate decision and so I have to avoid
that. But my staff would certainly be able to provide that type
of information.
Mr. Green. OK. We will ask that on a staff level.
Also, I was frustrated when Texas was included in the Cross
State Air Pollution Rule for sulfur dioxide and tried to work
with EPA, and again, my colleague Joe Barton and I worked with
EPA to no avail, and then talking with Management and Budget
and the EPA many times before the rule. Even though Texas was
not included in the proposed rule, once they obviously made the
decision to include Texas, did they try to work with TCEQ at
all before the rule went final?
Mr. Shaw. No, sir, and in fact, we made several requests
for an opportunity to meet with either Ms. Jackson or other
officials on that issue and were unable to do so, primarily to
express concern that without opportunity to comment on that,
they were moving forward with the rule. And in fact they did
move forward without allowing us to provide input that would
have shined a different light on some of the data they used to
make that determination.
Mr. Green. Well, and one of the concerns I had about that
was that a lot of their modeling, although originally most of
us who looked at it, Texas wasn't included, but then much after
all the discussion, all of a sudden we were, but it was
modeling instead of actual on-the-ground facts.
Mr. Shaw. That is correct. The reason they justified
including Texas was based on updated data which they didn't
give us a chance to evaluate and point out some problems with
the updated emissions data as well as modeling to predict that
Texas was going to contribute to a downwind monitor, which by
the way, is attaining air quality standards. It is not
projected to exceed the air quality standards, but nonetheless,
they used that modeling to somehow tie Texas to that rule.
Mr. Green. And my next is about flex permits, but I
appreciate TCEQ. I probably have the most monitored district in
the country.
Mr. Shaw. Yes.
Mr. Green. Five refineries and lots of chemical plants,
both TCEQ, EPA, my local Harris County pollution control
agency. The industry now to their credit is fence line
monitoring because they don't want to get blamed for what their
neighbors are doing because we have them literally fence to
fence.
There is data available instead of doing, you know--you can
actually get real-time data on whether we are contributing to
Illinois and Indiana's pollution from central and east Texas,
but like I said, I come from an oil and gas area, not a coal
area, so I will let Joe Barton and folks work on that.
On the flex permit, EPA's disapproval of the Texas Flexible
Air Permit program and how the deflexing process is going, I
know I have worked with all my plants along the channel and was
concerned because on any given day, we have such huge
facilities, if they have a slowdown in getting permitting, you
are going to slow production. Can you tell how the deflexing
process is going? Because it is the first time in history.
Mr. Shaw. It is the first time, and it is moving along. We
have 65 facilities successfully deflexed. The key component to
that, Congressman, is that there have been no environmental
benefits associated with that. It has been a great bureaucratic
waste of time and effort. All that has occurred has been lots
of time and money spent and some loss of flexibility for those
facilities. Quite frankly, it was and still should be a program
that is held up as innovative and creative and the way we ought
to be relating to industry to encourage and incentivize
reduction.
Mr. Green. Well, I know some of the concern is that Texas
had huge numbers of these flex permits compared to our
neighbors in Oklahoma. You give us a hole, we will drive a
truck through it. But it worked because the air quality had
improved, and I understand the problem was that they couldn't
understand the flex permitting, so they wanted all the
paperwork to add up even though the results from the monitoring
were still good and getting better.
Mr. Shaw. In fact, the requirement to get a flexible permit
was that they had to model a facility on worst-case scenarios
and so effectively they were having to overcome an even greater
burden so that the worst-case operation would be protected,
which is even more stringent than a typical permit requirement.
Mr. Green. Mr. Chairman, I can't see the clock. Am I out of
time or have a couple of seconds left?
Mr. Whitfield. Yes, you have gone 30 seconds over.
Mr. Green. Oh, I apologize.
Let me just say, because the concern about underground
injection, and I know our wells, and I know the Railroad
Commission does that. We will submit questions.
Mr. Whitfield. Thank you.
At this time I recognize the gentleman from Oklahoma, Mr.
Sullivan, for 5 minutes.
Mr. Sullivan of Oklahoma. Thank you, Mr. Chairman.
Mr. Sullivan, I would like to ask you a couple questions.
You stated in your testimony that the former Region 6
Administrator Armendariz met with your organization in 2010 and
made it clear ``he intended to initiate an attack on oil and
natural gas producers within Region 6.'' Could you tell us more
about that meeting and why he gave the impression that he would
be aggressive with the oil and natural gas producers?
Mr. Sullivan. Yes. You are referring to a meeting 2 years
ago this week, actually our annual meeting of the OIPA, and we
invited him to come to present, and there were probably 600
Oklahoma producers at that meeting. How many of them attended
the actual session he was involved in, I can't tell you. But I
do know that when they came out of that room, there was concern
because the theme of his remarks was, there is a new sheriff in
town and we are going to enforce oil and gas regulations with
vigor. So that was the first straw in the wind that we had
frankly, and the attitude listening to him by our group was one
of fear.
Mr. Sullivan of Oklahoma. Wow. While he has resigned, do
you continue to be concerned about the aggressive rhetoric and
actions of the EPA from that meeting and going forward with
what you have in some of the actions they have taken?
Mr. Sullivan. Well, I am not here to pile on Mr.
Armendariz's remark, but in the context that is indicative of
an attitude and a messaging that is coming at us every day, I
am very concerned about it, and let me mention something that
has not been mentioned in this hearing. One of the two biggest
ingredients in our business are technology and capital, and
capital comes towards any business or industry where it is
invited. It flees where it is discouraged. And with this kind
of air or threat, if you want to call it that, of overreaching
by EPA into our industry, that capital can very easily go
anywhere else.
Last year, calendar 2011, I plowed back 130 percent of the
cash flow from our little company. Well, how did you do that?
Well, I put all mine back on the table and went out and
attracted some other capital. In sitting with those people who
I am asking to write checks to go drill wells for, they are
reluctant to put money into an industry that has this kind of
overreach, the cloud there. So when these messages are being
sent, not just from Mr. Armendariz but from the entire EPA
experience where we deal with them along the way, it is very
harmful to our company. As I testified, every dollar we put
into the business, there is $5 of benefit. So that is the way I
kind of measure it is, is it scaring away money?
Mr. Sullivan of Oklahoma. Well, do concerns about EPA
regulatory overreach impact economic growth? You talked about
that, job creation, and, you know, one of the things that--one
of the biggest complaints I get when I go around the district
or Oklahoma or in the country, for that matter, it kind of
underscores what you said, is that they say, ``What are you
politicians going to do to create jobs?'' You know,
unemployment is high, unacceptable levels, and the thing is, we
don't create jobs. Politicians don't, but we can get out of the
way. And regulations, some are very necessary but there is an
overreach out there right now, and it is keeping a lot of cash
on the sidelines. The cash is not the problem. Capital
formation is there. Their debt is cheap. There is a lot of
private equity. Interest rates are low. But there is still a
lot of money on the sidelines, like you were talking about, Mr.
Sullivan, and this cash is not going to go to places that have
so many barriers there and uncertainty, and that is what we can
do to create jobs in America, especially in this industry, is
if we can just get out of the way. And any regulations going
forward should have some cost-benefit analysis and address how
it affects job creation and global competitiveness and how fuel
prices will go up and how it affects electric reliability. And
so I think that your testimony is extremely important, and
thank you so much.
Mr. Whitfield. Thank you, Mr. Sullivan.
At this time I recognize the gentleman from California, Mr.
Waxman, for 5 minutes.
Mr. Waxman. Thank you, Mr. Chairman.
Dr. Armendariz is not here today but he apologized for the
comments he made 2 years ago in DISH, Texas, and he resigned.
He also made it very clear that his comments were an inaccurate
way to describe EPA's enforcement efforts. Critics of EPA claim
that his comments provided ``a rare glimpse into the Obama
administration's true agenda.'' They claim that ``EPA's general
philosophy is to crucify and make examples of domestic energy
producers so that other companies will fall in line with EPA's
regulatory whims.'' They interpret his comments as proof that
EPA is happy to take enforcement actions against companies
regardless of whether they violated the law.
Mr. Mintz, you are an expert on EPA enforcement. We are
looking to you for a reality check. Who at EPA is making
decisions about when to bring an enforcement action in specific
cases? Are the decisions made by political appointees?
Mr. Mintz. No, sir, not at all. They are generally made by
career staff on a case-by-case basis.
Mr. Waxman. Do EPA Regional Administrators dictate whether
EPA takes a specific enforcement action?
Mr. Mintz. Not typically, no.
Mr. Waxman. We have heard claims that Dr. Armendariz's
unfortunate remarks about crucifying oil and gas companies
reflect the hidden agenda of the Obama administration. Mr.
Mintz, based on your own research on EPA enforcement, does the
Obama administration's approach to enforcement differ
significantly from past administrations?
Mr. Mintz. No, it does not.
Mr. Waxman. And the facts support that statement. According
to nationwide enforcement data provided by EPA, the Obama EPA
has taken fewer civil enforcement actions on average than the
Bush administration. The same holds true for Region 6, which
Dr. Armendariz led. The average amount of annual civil
penalties across the country has not increased, either. So that
is the big picture.
Let us take a couple of examples from this panel. Mr.
Short, the regional haze issue you raised today isn't an
enforcement issue, is it? This involves air rules and
implementation plans. Isn't that right?
Mr. Short. That is correct. The State has responsibility
along with EPA to develop and implement a plan to address the
regional haze piece.
Mr. Waxman. And EPA issued a proposed rule on the State
Implementation Plan a few days ago indicating that the parties
should discuss the issue to see if they can resolve it. Isn't
that right?
Mr. Short. Yes.
Mr. Waxman. Mr. Etsitty, are there areas where the Navajo
Nation EPA has worked well with EPA? Are you supportive of
their enforcement approach with regard to the remediation of
abandoned uranium mines?
Mr. Etsitty. Thank you for the question. Yes, we have had
good working relationships with EPA Region 9 and Region 6
addressing the problem of abandoned uranium mines and the
cleanup necessary.
Mr. Waxman. Well, Dr. Armendariz's poor choice of words did
not represent some sinister, previously undisclosed EPA
enforcement policy or philosophy. Frankly, the absurdity of the
anti-EPA rhetoric coming from the other side of the aisle and
from some industry groups is stunning. These extreme
accusations are completely divorced from reality. EPA should be
enforcing the laws on the books. That is common sense. Career
professionals have been doing that important work for the last
40 years. Congress should be supporting their efforts, not
attacking them with fact-free rhetoric.
Thank you, Mr. Chairman. I yield back.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Dr. Burgess, for 5 minutes.
Mr. Burgess. Thank you, Mr. Chairman, for the recognition.
I want to thank our witnesses for being here today.
You know, it is a shame that Dr. Armendariz could not be
here. It would have been good to get his perspective on things.
He obviously said the things he said that many in my district--
because the concern of the people on the ground in DISH, Texas,
about what they saw happening in their community and Dr.
Armendariz went there because of that concern that had been
expressed to him by the mayor and other people in the town. I
am just absolutely stunned and puzzled by Mr. Waxman's comments
where he says that Dr. Armendariz did not result in any
additional enforcement action. So what was accomplished? He got
some headlines. He lost his job but he got the attention that I
guess he sought, but what about the long-suffering people of
DISH, Texas? Did they get any remediation for the problems for
which they sought a solution? And what did happen, and I will
just tell you this, as a consequence of that night, the public
perception that their safety and health was being protected,
whether it be by the State agencies, the Federal agencies,
local agencies, the public perception was badly damaged.
Now, Mr. Smitherman has already eloquently outlined just
how important the oil and gas industry is to our State. We
didn't know about the recession until a full year after the
rest of the country found out about it because of, in my area,
the Barnett shale and the production of natural gas from that
shale formation and the jobs that resulted from that. So it is
an integral part of the economy and they are all linked
together. So I would just ask the question of Dr. Armendariz if
he was here, what did you attempt to accomplish and what do you
think you did accomplish by making remarks like this?
Now, unfortunately, with Dr. Armendariz, there is a history
of not meeting with people. I reached out to him at several
points to have a discussion. I had met with Richard Green, the
previous Region 6 Administrator in the Bush administration, had
a good relationship, we met several times over the 6 years that
he and I communicated in the 26th District. I met with Mr.
Coleman since Dr. Armendariz has left so I have already
established a relationship with his successor. I was not
successful in securing a meeting with Dr. Armendariz and then
as we all know, at the end of April, the Deepwater Horizon blew
up and that took a lot of his time. So unfortunately, it just
never happened, but it wasn't for lack of trying on my part.
Let me just also reference the comments that were made by
Chairman Emeritus Barton, or the question that was asked
actually by Mr. Rush to Chairman Emeritus Barton about the
health officials, and I would welcome the opportunity for
health officials to come to this committee. Dr. Shaw, as you
know, shortly after I met with you all, or I guess we had a
conference call in May of 2010, I also invited in the folks
from the Department of Health Services in Texas because there
was an ongoing investigation as to cancer clusters,
particularly in Flower Mound, Texas, but other areas as well,
and although those results were preliminary and I have not been
informed that anything has changed, the resultant study of the
cancer cluster revealed that there was no anomaly. And again, I
have not had any recent follow-up from them to tell me that
that is different, and maybe that would be a good question to
ask.
Mr. Smitherman, I think you said it so well. We need you
all, your State agencies, TCEQ and the Texas Railroad
Commission, we need you to be functional and working
organizations and we need for the public to have confidence
that when you are working, you are there on the job, the cop on
the beat to protect them and additional help is needed from the
EPA. If it is required, great, they are there as an ally, not
as someone who is going to come in with a bludgeon and try to
destroy what you are doing. I just welcome both Mr. Smitherman
and Dr. Shaw to make comments on that. You guys have seen this
on the ground. Mr. Smitherman, I guess you weren't there when
DISH was having all the problem, but since then, let me just
ask you the question, did Dr. Armendariz do any good for the
long-suffering people of DISH, Texas, with his remarks that
night?
Mr. Smitherman. No, he didn't do any good, and again, what
we come back to at the Railroad Commission is, these
investigations should be grounded in science and the facts, not
in an anti-fossil fuel agenda, because when they are grounded
in science and facts and the facts do come out and it is
determined without question that the gas was naturally
occurring, it was from a different formation, it was
unassociated with the drilling activity in the Barnett shale,
that gives everyone the confidence to allow this process to
continue, and this process is creating this wonderful bounty of
oil and gas that we have leading us to energy independence and
creating great jobs, not only in Texas but throughout the
Southwest and across America.
Mr. Burgess. Dr. Shaw?
Mr. Shaw. Let me, if I can, quickly say that the role of
TCEQ is the enforcement agency for environmental rules in the
State of Texas, so we were engaged in DISH in enforcement and
the reason that we don't see an impact of what Dr. Armendariz
accomplished is because we were already on the ground. We were
already there making certain that those rules were being
followed and were being protective, so that was not--there was
not a need for him to step in.
Mr. Whitfield. The gentleman's time is expired.
At this time I recognize the gentleman from Texas, Mr.
Gonzalez, for 5 minutes.
Mr. Gonzalez. Thank you, Mr. Chairman.
Before I pose any questions, I want to give some context.
More activity logically means more attention, so this is a
story from the San Antonio Express News way back in July of
2010. We could update it on the numbers. Texas supplies 20
percent of U.S. oil production, 25 percent of natural gas, 25
percent of refining capacity and 60 percent of chemical
manufacturing. So I think there is a lot of activity.
Now, there are consequences to that. This is from a story
on January 12, 2012, from the same newspaper, San Antonio
Express News. Texas coal-fired power plants and oil refineries
generated 294 million tons of carbon dioxide and other heat-
trapping gases in 2010, more than the next two States combined.
Those two States happen to be Pennsylvania and California, by
the way. Too bad my colleagues are not here.
So there is probably going to be more EPA activity in Texas
for all those reasons. Now, the question as posed by some of my
colleagues and a legitimate concern is, what is going to be the
economic impact, so I will just go all the way back to a
September 2011 Express News story again, and that is that the
Texas oil and gas industry actually was back at pre-recession
employment highs as of June 2011. So despite this onerous EPA
regional director, obviously Texas is still doing fairly well,
all things considered. So that is context.
So what I want to ask my two chairs from the great State of
Texas is simply, is the United States' health and environment
better as a result of EPA? Just yes or no.
Mr. Smitherman. Well, let me say in particular,
Congressman, in Texas, a lot of the benefits we have seen are
the result of increased use of natural gas to make electricity.
So natural gas is a very clean fossil fuel and we are using
more of it.
Mr. Gonzalez. And I know, Mr. Chairman, my time is so
limited. The coal-fired plants in Texas contribute about 61
percent of the greenhouse gases, and I am all for natural gas.
I mean, we are producing. We don't know what to do, we have so
much out there. I am just asking a simple question for the
legitimacy of an agency such as the EPA, which obviously was
created during the Nixon administration: Are we not better as a
Nation for the work of EPA? Chairman Smitherman?
Mr. Smitherman. Here is my response. When the EPA's
regulations are grounded in science, then they should be
legitimately adhered to and followed, but if you look at the
CSAPR rule, the MACT rule and the greenhouse gas rulemakings
that are occurring, I would argue that they are not grounded in
science.
Mr. Gonzalez. But my question is a simple one. I will get
to the science if I can get in my last minute because my next
question is going to be about science. Is this country's health
and environment, conditions of our health and environment,
better as a result of the EPA to date?
Mr. Smitherman. Well, I would speak to Texas where we have
reduced SO2 and NOx dramatically over the last 8 to 10 years
for a variety of reasons. I would not fully attribute that to
the EPA's actions.
Mr. Gonzalez. Chairman Shaw?
Mr. Shaw. Congressman, I would suggest that during the last
3 years, our ability to continue improving the environment in
Texas has been diminished because of actions by the EPA. That
is, some of our tools that we use most effectively to achieve
environmental reductions have been taken away from us. The
flexible permit and others have been taken away from us. I
would like to refer to it as EPA forcing us to chase the wrong
rabbits. We are chasing agendas that don't have the
environmental and health benefits associated with them, and
that takes away from our ability.
Mr. Gonzalez. And I understand that, but I think both of
you are still not addressing the central question is that there
is a Federal role to be played as long as it is in a
cooperative, collaborative spirit. The attacks today are that
we don't have that, and I am just saying, OK, what is going to
be reasonable under these circumstances. Both of you say that
good science is not being followed. I will tell you now, when I
was a judge, we had expert scientists. We had experts all the
time. One side would hire one, the other one would hire one,
same facts, same figures, different conclusions. The only way
we ever got around that was if we could have some sort of a
neutral arbiter that both sides would agree was a recognized
expert and then the court would run that particular list,
appoint somebody.
So I am going to ask both Mr. Smitherman and Mr. Shaw, who
should be the arbiter of what is good, acceptable, credible,
legitimate science?
Mr. Smitherman. I would say it should be done in a
collaborative way. The Cross State Air Pollution Rule is a
great example of a rulemaking that went forward without any
input from anyone in Texas, industry, regulators, citizens or
anyone else.
Mr. Gonzalez. I could agree with the proposition that that
is accurate, of course. It makes sense.
Mr. Shaw. And that is the challenge, Congressman, is that
we have not had the opportunity to discuss that science because
EPA has failed to engage on the science because that is the
ground we can work with. And, unfortunately, EPA's message has
been, we are not interested in the science and even following
the law. They want to have, for example, the flex permit
program go away even though they didn't have a scientific or
legal reason to make it go away.
Mr. Gonzalez. And I understand the flex issue. If you are
from Texas, you are a little more familiar with it because we
have had great discussions at the EPA and with Dr. Sunstein.
I yield back. Thank you for your patience, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Kansas, Mr. Pompeo, for 5 minutes.
Mr. Pompeo. Great. Thank you, Mr. Chairman.
I want to talk about a specific provision that is in the
Clean Air Act, but before I do, Representative Waxman talked
about the fact that we thought that the former director of
Region 6 was enforcing some hidden agenda. There is nothing
hidden about this agenda. I don't think anybody that could
reasonably look at what is going on--you can read it on the
pages of Sierra Club. We start with beyond coal, we go to
beyond oil to now beyond natural gas. We are beyond common
sense is where we have really gone today, and so I don't think
there is anything hidden about the attacks on the fossil fuel
industry from coal and natural gas and all the others.
I want to talk about the general duty clause of the Clean
Air Act. I started to read about lots of enforcement actions
under this provision. It is exactly what it says. It is a
general duty. It says a stationary source has a general duty to
be safe when handling extremely hazardous substances. There is
no definition for safe. There is no definition for extremely
hazardous substance. And Region 6 is the perfect example of
what happens when you have provisions that are this general.
They engaged in over 83 oil and gas production inspections and
wrote over 23 administrative orders under Section 112(r) in
Region 6 with hundreds of thousands of dollars in fines.
In their own report, they talk about using infrared cameras
in the Barnett shale area to find gases that are escaping and
issuing citations under the general duty clause. They conducted
aerial surveillance in Oklahoma. Mr. Sullivan, I don't know if
they were looking for you or if this was a more general
expedition using aerial surveillance to find gas leaks at
different places.
I just wondered if any of you, Mr. Smitherman, Mr. Shaw,
Mr. Sullivan, have any comments on the impact of the
enforcement techniques being used under Section 112(r), this
general duty clause, any of the three of you.
Mr. Shaw. Sure, Congressman. I will certainly chime in. We
use the infrared camera as a great tool. One of the things
that--back to the science and making sure that we have
enforcement that makes sense and is fair and just is to
recognize that that technology is not able to quantify
emissions. It can identify when there is an emission occurring
but we always follow up with our proven technologies to make
sure we can quantify and accurately determine what emissions
are so that we can take the proper enforcement action if and
when necessary.
Mr. Smitherman. The only thing I would add, Congressman, is
earlier we heard about the deterrence theory of enforcement,
and I would say this is an extremely slippery slope. If we are
going to allow regulators to go forward without any evidence
just because there might be a problem, then we have completely
unbridled regulation and that should never be the case. It
should be always grounded in a reasonable belief in science.
Mr. Pompeo. I appreciate that. I am actually drafting some
legislation to try and force the EPA to put definitions around
this and quantify and use science-based approaches instead of a
very general, very unspecific thing that is just prone to
enforcement abuse and enforcement that is inconsistent across
regions and across the country.
With that, I yield back my time, Mr. Chairman.
Mr. Whitfield. The gentleman's time he yields back.
At this time I recognize the gentleman from Virginia, Mr.
Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman. I appreciate all of
our witnesses being here today.
I would like to start with a little correction in history.
While we have been referring to Mr. Armendariz's comments, he
got his history all wrong. It was not the policy of the Romans
to go into a village and crucify people to hold the village in
check. There may have been--because history is not complete,
there may have been a rogue actor somewhere along the way, but
I think it is important that we don't perpetuate his statement
as if it were fact. It may have been his opinion but it was not
historical fact. And in the history of Western tradition,
obviously there have been many brutal acts committed along the
way but with rare exception, it was not the policy of any
regime to execute individuals in any manner willy-nilly without
some cause. We may not have agreed with that cause but
generally--there are some exceptions but generally that has not
been the case. So I would hope that anybody who might be
studying this would not be thinking that that was real history.
It may be history in his mind but not facts.
That being said, Mr. Shaw, you started on one of the
questions previously to talk about the last 3 years and the
fact that you have lost some of the weapons that you have had
to try to make health concerns better. Could you expand on that
for me, please?
Mr. Shaw. Sure. Thank you. It ties into the reason that the
concerns or the statement that Dr. Armendariz made were
concerning. It is not because of the statement itself, it is
because it was reflective of what wasn't a rare glimpse. It was
a common thread where we see the current EPA willingness to
circumvent good science, to circumvent their own regulations.
And that showed up not only in some of the enforcement cases
you have heard today, but it was also very prevalent in the
Flexible Permit program, which is an innovative process that we
had that was and should be held up as a very necessary process
for moving forward to get additional reductions in emissions.
It is prevalent in the process that was used in the Cross State
Air Pollution Rule whereby EPA subjected Texas to that rule
without the opportunity for us to comment on data and correct
those data so that we could indeed have more meaningful
regulation.
Having that does a couple things. One, it makes us chase
the wrong rabbits. We spend resources, time, money and others,
trying to get these improvements where there is no real
environmental benefit because the science is not there and the
benefit is not real.
Mr. Griffith. Are you saying that you are chasing the wrong
rabbits because they may be basing their opinion on some false
fact or some false historical fact like the previous one
mentioned or some other false science and therefore you are
having to chase that down and correct that record before you
can go on to help clean up something that is a real problem?
Mr. Shaw. It is both: Bad data--which is unfortunate, in
this day and time we should all make sure we have the best
data, we would have been happy to have provided more accurate
data to EPA for their analysis; it is also their analysis that
they utilize, which again is very difficult to analyze because
they are not forthcoming in sharing that process. And then
finally, it is the way they apply. For example, to be very
brief, but in the CSAPR, the Cross State Air Pollution Rule,
EPA was subjecting Texas at the time to a 47 percent reduction
in SO2 emissions from July until December--we were supposed to
come up with those reductions--based on a model which is flawed
and very challenging to use, in any case, that predicted that
we would have a .18 microgram per cubic meter, a very, very
unmeasurable component, to a monitor in Granite City, Illinois,
which you couldn't measure, couldn't monitor, and at the same
time, EPA's own data show that that monitor is in compliance
and will be projected to be in compliance continually. And so
we were going to be looking at spending millions of dollars for
no real environmental benefit, and ultimately what you see, the
common denominator of many of these rules, it was going to put
much coal and other electric generation out of business.
Mr. Griffith. And that touches on Mr. Sullivan's comment
that if you are using capital for these things, you don't have
capital available to expand other jobs or industries. Is that
correct?
Mr. Shaw. That is correct, and quite frankly, our
generation capacity in Texas is suffering because people are
hesitant to build new generation capacity because of that
uncertainty.
Mr. Griffith. And Mr. Etsitty, am I correct in assuming
that if the facilities that you mentioned in your testimony are
not allowed to go forward, that that will cause economic stress
and loss of jobs in the Navajo Nation?
Mr. Etsitty. I thank you for the question, Congressman.
Yes.
Mr. Griffith. And would it be fair to say that if you had a
similar situation like my district, which is heavily dependent
on coal, both for jobs and production of electricity, that the
same would be true there or any other area of the Nation where
people are relying on their natural resources?
Mr. Etsitty. I would say it is a similar situation, yes.
Mr. Griffith. And so the policies of the current
administration by not working with you all are in fact killing
jobs or could kill jobs?
Mr. Etsitty. That is correct.
Mr. Griffith. Thank you. I yield back my time.
Mr. Smitherman. Congressman, if I may add, in Texas, had we
not got a 6-month delay in the CSAPR rule, we would have seen
two coal-fired plants shut down and the elimination of at least
500 good-paying jobs.
Mr. Griffith. Thank you very much for the addition.
I yield back.
Mr. Whitfield. At this time I recognize the gentleman from
Illinois, Mr. Shimkus, for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman.
Thank you all for coming. We have gone down this path
numerous times, and part of it is the administration's own
doing, and we aired the clip from his San Francisco Chronicle
editorial board in which he basically says, ``My goal will be
to bankrupt the coal industry.'' Isn't it any wonder why that
sector is concerned, the fossil fuel sector in this country?
And then you add to the Region 6 Administrator down there,
boiler MACT, mercury MACT, cooling towers, attack of current
generation, attack on future generation greenhouse gas rules.
And Dr. Mintz, just a quick answer. I should really read
your analysis a little bit better. Have you done stuff on EPA--
in your analysis, have you done things on the costs of
compliance and litigation before the rules get promulgated, the
cost to business, the environmental community going and using
the courts versus regulation, court ruling and then the
judgment fund paying off the litigants? Have you done any
analysis on that and the cost or the effect of doing business?
Mr. Mintz. Well, no, sir. Most of my research on
enforcement doesn't focus on those issues, which are really
policy issues and regulatory issues.
Mr. Shimkus. But you would agree that there is a cost of
doing business if there are processes moving to a regulatory
regime and different communities going through the courts to
try to get a new standard outside of their whole regulatory
process kind of shortening their ability? You would agree with
that, would you not?
Mr. Mintz. I am not sure I understand the question, sir.
Mr. Shimkus. Well, it is really a statement. What we know
is occurring is the environmental community goes to the Federal
courts, we think on encouragement by the environment community,
to get a judgment that creates a higher standard versus them
going through the regulatory process. And then they use the
judgment fund to reimburse the environmental lawyers. Maybe you
want to look into that as another research project, and we can
have you back and talk about that.
Mr. Mintz. Well, I will be happy to do that.
Mr. Shimkus. No, it is----
Mr. Mintz. If you would like me to respond, I don't know if
you----
Mr. Shimkus. Well, no, I actually wanted to go to Mr.
Sullivan because he made a point on, you are not Big Oil. So
let me go through these three Big Oil tax cuts and tell me why
you say that is normal business expenses. Expensing intangible
drilling costs, why is that normal business?
Mr. Sullivan. Well, first of all, it is a funny phrase to
most non-tax folks.
Mr. Shimkus. You are going to have to go quick to get
through all these.
Mr. Sullivan. OK. It is the part of the cost of drilling a
well, and we are allowed to deduct that just as anybody running
an apartment house or anything else would deduct expenses, but
it has become a lightning rod because it is the oil and gas
business.
Mr. Shimkus. So bottom line is, it is the cost of doing
business, so if you are doing income and revenue, you have got
to take off the expenses and that is part of the expenses of
operating a business.
Mr. Sullivan. Right, roughly 30, 40 percent of the cost of
a well.
Mr. Shimkus. How about the manufacturing tax deduction for
domestic oil and gas companies?
Mr. Sullivan. As I understand it, that applies only to very
large companies over 500 employees or something of that sort.
Mr. Shimkus. They define themselves as manufacturers so
they are getting the same manufacturing tax break that any
manufacturing company is getting, correct?
Mr. Sullivan. That is correct. Dollar-wise, it means----
Mr. Shimkus. No difference?
Mr. Sullivan. Right.
Mr. Shimkus. What about the percentage depletion allowance?
Mr. Sullivan. Well, that just simply--it is an akin
deduction to depreciation of an apartment building. We have a
wasting asset down there under the ground.
Mr. Shimkus. So you are telling me that the attack on Big
Oil and their sweetheart tax deals is current tax law that
applies to anybody who is in business?
Mr. Sullivan. I believe. I am not a tax expert but I
believe that the major oil companies are not entitled to
percentage depletion. I think they are forced to do cost
depletion.
Mr. Shimkus. Yes, I have got the Illinois oil basin, a lot
of marginal producers. These are the ones that are getting
lumped in. And would we have marginal oil well production in a
lot of the small basins in this country without these
provisions?
Mr. Sullivan. I think it would not only terminate the lives
of some wells that are on hospice, which are marginal wells,
but it would also prevent--or reduce the cash flow for drilling
new wells.
Mr. Shimkus. I have never heard that terminology. I might
use that one of these days.
Yes, sir. I am trying to figure out which one you are. Real
quickly on----
Mr. Short. Me too.
Mr. Shimkus. You said that the haze ruling, the change is
imperceptible to the human eye, did you not?
Mr. Short. That is exactly what I said, to go from $77
million, which is what the State plan called for and met all
the goals and objectives, to $705 to $800 million, it is
imperceptible to the human eye.
Mr. Shimkus. So why would we do it?
Mr. Short. That is exactly our point. Why would we do it?
And we have been trying to sit down with EPA for a long time,
even though the Congressman asked me, will they sit down and
talk with us. The answer is they are supposed to. They didn't
in this case, and as a result, we are continuing to ask for
that meeting to sit down and talk because we think we can come
to a resolution. We just don't think spending $77 million or
$805 million is a good investment in resources and dollars, and
certainly from that perspective, the customer is going to have
to pay for it.
Mr. Shimkus. Thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Mr. Olson, for 5 minutes.
Mr. Olson. I thank the chair, and welcome to the witnesses.
Thank you all for your time and expertise, and a special
welcome to Commissioner Smitherman and Commissioner Shaw. I
know back home, the Aggies of Texas A&M University have a
little more swagger in their steps with you guys up here
testifying before Congress today, so thank you all for coming.
And before I get to my questions, I want to publicly
express my disappointment that the lone witness for the first
panel, the former Region 6 Administrator for EPA, Al
Armendariz, canceled out and did not testify before this
committee today. I represent Texas 22. Over 920,000 people
depend on me up here in Congress to speak with their voices and
get answers to their problems back home in Texas, and because
they are very concerned that a former Regional Administrator
had a political agenda. His agenda wasn't about any sort of
clean water, clean air. It was an agenda about getting rid of
American production of energy, specifically, fossil fuels--oil,
gas, coal. They deserve answers, and unfortunately, he did not
come up here today and give me a chance to get those answers.
There is no need for me to bring up Range Resources. I
mean, my good friend Joe Barton, former chairman of this
committee and coach of the Congressional baseball team on the
Republican side, knocked that thing out of the park and so I
don't want to talk about that.
But I do want to focus on a developing problem in Texas,
and it is with EPA as well, and it is the Las Brisas Energy
Center in Corpus Christi, and so my question is primarily for
you, Commissioner Shaw, but Commissioner Smitherman, if the
spirit moves you to get involved, please make some comments.
But this project right now--we have the second most populated
State in the Nation and the fastest growing State and we are
expected to have a 2,500-megawatt shortage in generating
capacity, the equivalent to five large power plants, in as
little as 2 years. So we need power plants being built. The Las
Brisas Power Plant is being built right there in Corpus
Christi, Texas, a 1,320-megawatt electric power generating
station that will bring 100 percent petroleum coke, a byproduct
of nearby refineries in Corpus Christi in the Gulf Coast. It
will generate enough power to provide power to more than
850,000 homes. And after a 3-year permitting process, the Las
Brisas Energy Center received his final prevention of
significant deterioration, its PSD, from the Texas Commission
on Environmental Quality. But due to EPA's new greenhouse gas
regulations released after Las Brisas Energy Center received
its permit from PCQ, the project may have to begin the
permitting process all over. Las Brisas could actually provide
a net reduction in greenhouse gas emissions by locally sourced
petroleum coke--by using locally sourced petroleum coke more
efficiently and effectively than greenhouse gas emissions from
shipping. So my question for you, Chairman Shaw, is, can you
give us an update on your progress with EPA on Las Brisas?
Mr. Shaw. I have to be somewhat cautious in discussing it
because it is a case that is going to be coming back before my
agency so I can't, for ex parte communication, can't talk
specifics about that case. But I will concur that the process
you laid out is accurate, and with regard to the greenhouse gas
regulation requirement, it is somewhat challenging that we have
many of these rules that are up in the air and pending, and as
we try to have additional resources built to generate
electricity, the clock never stops. We get through the process
of permit application and then there are new regulations that
come out of EPA, and those also apply. And so there is some
challenge with how we ever move forward to getting one
completely permitted and able to be built when there is this
continued uncertainty that is associated with that, the
greenhouse gas permitting requirement being one of those, and
the challenge of getting EPA to timely act on issuing those
greenhouse gas permits because the State of Texas, you are
aware, has not agreed to accept that responsibility of
regulating greenhouse gases and writing those permits. So it is
an ongoing issue, and it has the great potential to exacerbate
that problem that you lay out where we imminently need more
production. We have about a 2 percent growth in energy demand
each year and somewhere about 1-1/2 percent, I believe, of new
generating capacity being brought online and that is not
improving because of the uncertainty associated with pending
regulations.
Mr. Olson. Thank you. Again, our first panelist couldn't be
here today so I am not asking you to read his mind, but do you
think the fact that he was retained to testify against Las
Brisas prior to his role in EPA, do you think that had
presented a conflict of interest?
Mr. Shaw. Certainly, if one looks at the challenges that
Dr. Armendariz faced, it appears that he had a difficult time
transitioning from his role prior to being Regional
Administrator. Much of that we have talked about in the Barnett
shale and others where he seemed to not be able to turn loose
some of the activist activities he had taken prior to working
with EPA. He seemed to have a hard time making that transition
from someone who is trying to push for, as an activist, to a
regulator, who has to balance and decide based on the facts and
science and the issues. So it is not unreasonable to make that
determination.
Mr. Olson. Thank you. I yield back.
Mr. Whitfield. Thank you.
At this time I recognize the gentleman from California, Mr.
Bilbray, for 5 minutes.
Mr. Bilbray. Thank you, Mr. Chairman.
Mr. Chairman, before we start, I would like to say I am
sorry that the witness in the first panel didn't show up, and I
think there is one thing that both sides of the aisle here on
this panel can agree on. I think we would all be shocked if a
local law enforcement officer went into the suburbs of, let us
just say Chicago, and had a punitive attitude about a small
businessman or somebody engaged in their neighborhood activity
and came out with an attitude that somehow we are going to sock
it to one guy to set an example for the rest of the community
that, you know, ``I am here to enforce the law and even if it
is a little overbearing, I am going to do it, I am going to
profile this guy and we are going to make a point.'' I think we
would all be outraged at a local law enforcement officer doing
that.
And as somebody who has worked with environmental
enforcement, I think we should be just as outraged when a
Federal law enforcement officer for an environmental group
takes the same attitude. I think it is not just unfair, I think
it is immoral and I think it is outrageous when we think about
the fact that we will not accept local people being paid with
government funds, taxpayers' funds and then being punitive
against a citizen, but we are kind of not shocked that when a
Federal bureaucrat takes the same attitude with the same
punitive attitude being paid by the same taxpayers. I think we
should be just as outraged that this is a violation of
everything that this country stands on and it matters just as
much if the Federal Government is the bad guy here as it would
be a local guy, and I think we have almost got this attitude
that well, if they are environmentally leaning, we can justify
it. That is the same kind of attitude that justified vigilante
groups saying well, it is law enforcement, it is public
protection justifying this violation of common decency and
fairness, and I think both sides should be able to address
that.
Now, I will say this and I will move on. As somebody who
has supervised environmental agencies, I mean, let us face it,
the air districts in California are pretty darn powerful. I
managed one for 3 million population, bigger than 20 States of
the union, and the air resources board has got a whole lot of
environmental stuff. I would never accept an Administrator
taking the kind of attitude that I heard being stated by a
Federal Administrator, and I think this is one thing that we
should be able to address.
Doctor, I want to get to the details of what you are doing
over there. Isn't it true that the original legislation of the
Clean Air Act was sold to the American people and to Congress
based on the fact that it was targeted to protecting the public
health where no other strategy was going to be able to protect
that public health and the innocent bystanders who were going
to be impacted by one person's activity on their public health?
Wasn't public health the real backbone of the selling of the
Clean Air Act?
Mr. Mintz. Well, yes, that is the stated objective of the
Act, to protect public health and the environment, and that was
always at the root of it, still is, I believe. The language
hasn't changed.
Mr. Bilbray. And what we have done is that there has been
things like the clear sky issue and the modification of
crossing away from the public health, which justified the
heavy, strong actions that we have taken that have economic
impact. We have moved away from that into fields that were
never intended originally by either the public that wanted the
Clean Air Act or those who passed it originally and now we have
reached a situation where we get these conflicts with what has
been happening in New Mexico and the way the EPA has handled
that comes right into conflict with--I am trying to remember
the California law--oh, 1368 and comes into conflict with our
strategies on greenhouse gases where now you are saying that
California is going to be forced to change our greenhouse gas
strategies because it appears to be in conflict with what EPA
is trying to do in New Mexico, and, that is, our people are
saying we cannot legally pay for electricity if that
electricity rate is going to pay to retrofit a coal plant that
is being mandated by the EPA. Doesn't that create sort of a
catch-22 between Federal and two States?
Mr. Mintz. Well, that has been an argument that has been
made in litigation and there were counterarguments made in
litigation as well, and I guess that is before a court. I think
the Clean Air Act has been changed over time. It was amended in
1990 to add some provisions including the haze provision that
was mentioned earlier. At the same time, the fundamental
structure of the Act was not altered in 1990 and the thrust of
the Act toward protecting the public health has not changed and
that is still an important part of the statute.
Mr. Bilbray. Well, let me tell you something as somebody
that was on the air resources board at the time, we were very
concerned about the modification in the early 1990s and we
warned the Federal Government of mistakes they were making, and
in fact, if you remember, that was the time they started
requiring those of us in California to put methanol and ethanol
in our gasoline when we warned them, the EPA, that it was a
terrible mistake then. So mistakes have been made, and it is
interesting you bring that up.
I would just like to thank you very much for being here
today and being able to raise these issues and hopefully we can
get both sides working together to avoid these problems in the
future.
Thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Louisiana, Mr. Scalise, for 5 minutes.
Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
holding this hearing and I appreciate the second panel for
appearing before us today to answer the questions that we have.
I share my colleagues' disappointment and anger with Mr.
Armendariz for not showing up today. And if you go back, we
have had many attempts by this subcommittee to bring him before
our committee when he was in his official capacity at the EPA,
and for whatever reason he was not allowed to come testify. The
fact that now that he's no longer there, he had finally agreed
to come testify and then at the last minute canceled out
suggests that there may be some foul play, and I do think, Mr.
Chairman, we ought to look into whether or not there was any
influence, any bullying, any intimidation by the White House or
EPA or anyone else in this administration to get Mr. Armendariz
to not show up because he had finally agreed as a private
citizen to come and answer some of the questions that our
constituents surely have about the agenda he was carrying out
at the EPA and the fact that this is not an isolated incident.
If his was the only division within EPA that was carrying out
this kind of radical agenda, it would be bad enough, but the
fact that we are seeing it from other divisions within the EPA
begs a lot of questions throughout their various regions but I
think it goes well above his pay grade and the fact that he had
agreed to come and at the last minute backed out suggests that
there may have been some bullying and intimidation going on by
some people who didn't want him to come here and answer these
tough questions that many of us had. And so hopefully, Mr.
Chairman, our committee can look into that because I think
there are a lot deeper questions now to ask than just the ones
we had for Mr. Armendariz before this hearing was scheduled.
Now, I want to go into some specific questions. Mr.
Sullivan, you in your testimony talked about him coming before
your agency, your organization, and speaking at, I guess, an
annual meeting that you invited him to and from your testimony
it seemed pretty clear that he was not just there to be a
regulator. You know, in our view, a regulator is a referee,
somebody that is showing up there with the zebra-striped jersey
just calling--just implementing the rules, calling the plays as
they see them and making sure that both sides are doing
everything by the rules. From your impression, it seemed like
that was not the case at all, that he was actually there to
carry out an agenda, which is not the case of what a regulator
is supposed to do. Can you share with us, expand a little bit
on your experience?
Mr. Sullivan. Certainly, the impression--let me make it
absolutely clear. I may be the only producer in the room, but I
want to be clear that we as producers welcome regulation,
responsible, fair-minded, fair-handed regulation. We get that
from the Oklahoma Corporation Commission, which is the
equivalent of the Texas Railroad Commission.
Now, we also have to comply with certain Federal
regulations, but mostly the oil and gas industry is regulated
at the State level and it is our strong feeling that that is
where it should stay because there are, as has been said, very
uniquely, very separate and unique circumstances in each State
having to do with everything from the rock to the practices to
the streams and everything else and it is best handled at the
State level.
But having said that, to the extent that we are involved in
Federal regulation, we don't mind that as long as it is
conducted the way the Oklahoma Corporation does and the Texas
Railroad Commission which----
Mr. Scalise. And just like we do in Louisiana where we
fracture wells. You have to think 100,000 wells hydraulically
fractured safely in Oklahoma----
Mr. Sullivan. There are 800,000 wells that have been
drilled in Oklahoma back from literally 100 years ago, and I
would invite you to come down. We don't live in a cesspool. It
is very well regulated and very well implemented. So I think
the main thrust of my remarks is that the attitude that came
across from Mr. Armendariz is not unique to him, it pervades
the EPA and we don't understand why it can't be as it should
be, you know, collegial, fact-based interplay.
Mr. Scalise. And I think, you know, if you look at
agencies, take the FAA, for example, I mean, when there is a
plane crash, it is a tragedy, yet you don't ground all planes.
You go find out what happened in that incident and you do all
the things you can with the science to make sure it doesn't
happen again, but in the meantime, you allow the industry to
move forward. I don't think we have seen that from this entire
Obama administration as it relates to American energy unless it
is wind or solar where they will take a gamble and a bet on
something like Solyndra. But whether it is coal or natural gas
or oil, there seems to be a bias against all of the above,
surely not for all of the above, and if I can, Mr. Shaw and Mr.
Smitherman, if you all want to add anything to the experiences
you all have had as people at the State level who are dealing
with the regulations and doing the things you need to do to try
to produce and make sure your State can create the jobs that it
does.
Mr. Shaw. Sure, and I will simply state that as the primary
environmental regulatory agency in the State of Texas, the
comments that Dr. Armendariz offered were, as you mentioned,
indicative of the overall philosophy of the agency. And it
wasn't the first time that we had heard him, and he wasn't the
only one who made comments that concerned us with regard to
their lack of following the rules and law. And he made that
comment to his staff expressing what EPA's philosophy was, not
as rhetoric at a town hall meeting. It was comments he
initially made to his staff, and that is the concern, that it
clearly illustrates that philosophy that is not successful for
having a successful environmental program.
Mr. Smitherman. Congressman, I would add to that, that the
statements and the actions of the EPA in Texas would appear to
have set in motion similar actions in Pennsylvania and Wyoming.
For example, in December of 2011, a draft report out of Wyoming
said that the EPA believed there was a likely association
between groundwater quality issues and fracking. That came
after the EPA initiated in Texas. We now know that the EPA has
walked back those statements in Wyoming and in Pennsylvania.
Mr. Scalise. But the damage is done.
Mr. Smitherman. Correct.
Mr. Scalise. Thank you, and I yield back the balance of my
time, Mr. Chairman.
Mr. Whitfield. Well, thank you very much, and I certainly
want to thank the panel.
Before we conclude the hearing, Mr. Short, I noticed you
appeared to want to say something when Mr. Bilbray was asking
questions about the conflict between Federal law and State law
as it relates to the San Juan Generating Station. Did you want
to make additional comments about that?
Mr. Short. Well, I just wanted to agree with that. There
are some issues with that. I also wanted to make it clear when
Congressman Waxman asked a question about the EPA sitting down
with us, the real question is getting them to the table. That
has been a problem. We were not consulted during the rule
itself and so that has been a problem, and again wanted to say
that we did put a plan--New Mexico did put a plan together that
would meet the objectives of the rule and EPA said it wasn't
good enough and essentially just mandated the larger
expenditure of, you know, $750--I said $705--I am getting my
fives and zeros mixed up--with $750 to $805 million. So I
wanted to be very clear on that, and there is problems with
California as well increasing the level of mandates that we as
utilities are required to meet now with this additional piece
on top of it. It continues to drive the cost of serving
electricity up to our consumers, which are your consumers as
well.
Mr. Whitfield. OK. Well, thank you, Mr. Short.
I want to thank all of you for----
Mr. Burgess. Mr. Chairman, just before we wrap things up,
Mr. Scalise from Louisiana brought up an excellent point. I
mean, Dr. Armendariz is not here today, and as a private
citizen, that is his right. But I think we also should have
available to us any information exchanged between Mr.
Armendariz and the White House as to whether or not he would
testify today because it seemed like he was quite agreeable to
coming and defending his positions, and then he wasn't, and
with all the stuff that we have been dealing with, with the
backroom deals on the drug negotiations, I just feel like we
need to look at that and find out if there in fact was any
communication between Mr. Armendariz and the White House
regarding his testimony here today because, as a private
citizen, they should not interfere with that activity either.
I fully respect his decision not to come. That is his
decision as a private citizen. But at the same time, we need to
know the back channel information on that, and I would just
encourage the committee to follow up on that, and I will yield
back.
Mr. Whitfield. Well, thank you. As I said in my opening
statement, we do intend to explore the reasons behind this.
So, once again, thank you for coming. The testimony was
quite enlightening, and I must say that when--those people who
are dealing with Region 6 alone on a regular basis, we do from
the testimony see a bias against fossil fuel, lack of
collaboration and frequently insisting on FIPs instead of SIPs,
which are frequently meeting the requirements of the acts that
EPA enforces.
Mr. Rush. Mr. Chairman.
Mr. Whitfield. Yes, sir.
Mr. Rush. I have to respond to my friend from Texas's
remarks. I mean, there is no basis for his allegations or his
request for inquiry to the White House, and I don't know what
that is based on. Certainly, to me, this speaks of proverbial
witch hunting. I mean, you know, let us use the resources of
the American people. Let us use those resources in a more
productive manner.
You know, it is just kind of insane to be trying to
determine whether or not the White House asked the proposed
witness that he would come or not show up at this hearing. It
doesn't make sense. And I certainly want to go on the record as
being strongly opposed to that.
Mr. Whitfield. Well, thank you very much.
We do have very strong feelings about Mr. Armendariz, and I
don't think there is any question that he has poisoned the well
in the enforcement of EPA laws in Region 6. And he had agreed
to come and then yesterday his lawyer said he would not come,
and I don't know that we are going to take any formal action or
not but we intend to have some further discussions with him and
then obviously the committee as a whole would have to make any
decision, but thank you for your comments and thank you all
very much. As I said, it was very enlightening and we look
forward to working with you as we move forward for hopefully a
more collaborative effort at enforcing our environmental laws.
Thank you.
The record will remain open for 30 days.
[Whereupon, at 12:27 p.m., the subcommittee was adjourned.]