H. Rept. 112-108 - 112th Congress (2011-2012)
June 16, 2011, As Reported by the Energy and Commerce Committee

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House Report 112-108 - JOBS AND ENERGY PERMITTING ACT OF 2011

[House Report 112-108]
[From the U.S. Government Printing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    112-108

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



 
                 JOBS AND ENERGY PERMITTING ACT OF 2011

                                _______
                                

 June 16, 2011.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

         Mr. Upton, from the Committee on Energy and Commerce, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2021]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 2021) to amend the Clean Air Act regarding air 
pollution from Outer Continental Shelf activities, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     5
Committee Oversight Findings.....................................    12
Statement of General Performance Goals and Objectives............    12
New Budget Authority, Entitlement Authority, and Tax Expenditures    12
Earmarks.........................................................    12
Committee Cost Estimate..........................................    12
Congressional Budget Office Estimate.............................    12
Federal Mandates Statement.......................................    13
Advisory Committee Statement.....................................    13
Applicability to Legislative Branch..............................    13
Section-by-Section Analysis of Legislation.......................    13
Changes in Existing Law Made by the Bill, as Reported............    14
Dissenting Views.................................................    17

                          Purpose and Summary

    H.R. 2021, the ``Jobs and Energy Permitting Act of 2011,'' 
was introduced by Rep. Cory Gardner (together with Reps. 
Burgess, Green, Griffith, Kinzinger, McMorris Rogers, Olson, 
Pitts, Pompeo, Scalise, Shimkus, and Terry) on May 26, 2011. 
The legislation prevents lengthy and unnecessary air permitting 
delays of energy exploration in the Outer Continental Shelf 
(OCS). It achieves this by clarifying and modifying the 
relevant Clean Air Act (CAA) provisions as currently 
implemented by the Environmental Protection Agency (EPA). Key 
provisions of this bill:
     Clarify that the air permitting provisions were 
designed to focus on air quality impacts onshore, and not at an 
offshore site.
     Clarify when drilling equipment and vessels are to 
be regulated as stationary sources, and when they are regulated 
as mobile sources.
     Create a deadline for final agency action by the 
EPA and clarify judicial review.

                  Background and Need for Legislation

    The nation faces high petroleum and motor fuels prices, 
continued instability and anti-American hostility among several 
oil exporting countries, unemployment in excess of nine 
percent, and a rapidly growing budget deficit. Increased 
domestic oil production could help address all of these 
concerns, but only if the federal government were to allow it. 
America's untapped oil potential--in the Gulf of Mexico, the 
Pacific, the Atlantic, and numerous onshore locations--is 
substantial. Access to some of this oil is restricted outright, 
but even energy not explicitly off-limits is frequently 
subjected to onerous regulatory provisions that effectively 
make it so. Nowhere is the potential to expand American oil 
production--and the cost of not doing so--any greater than in 
the waters off Alaska's North Slope.
    Congress has enacted numerous statutes designed to ensure 
that energy exploration and production is conducted in a manner 
protective of public health and the environment. However, in 
many instances reasonable laws have been interpreted 
unreasonably by federal agencies or environmental extremists so 
as to block the expansion of domestic drilling. This is 
especially the case with regard to the EPA in its 
implementation of air permitting provisions under section 328 
of the CAA as applied to the Alaska OCS.

                 EPA'S NARROWLY DEFINED ROLE IN THE OCS

    Energy exploration in the OCS is extensively regulated by 
the Department of the Interior (DOI), other federal agencies, 
and impacted state and local governments. Congress added 
section 328 to the CAA for the specific purpose of ensuring 
that attainment and maintenance of National Ambient Air Quality 
Standards (NAAQS)--the key public health standards in the law--
are not affected by these activities. The CAA was never 
intended to empower EPA or environmental extremists to impose a 
backdoor drilling ban by precluding energy exploration that had 
already been approved by DOI and other agencies.
    EPA could do no better than to follow its own advice when 
it promulgated the regulations carrying out section 328. The 
agency stated that ``[i]n implementing, enforcing, and revising 
this rule and in delegating authority hereunder, the 
Administrator will ensure that there is a rational relationship 
to the attainment and maintenance of Federal and State ambient 
air quality standards and that requirements of Part C of Title 
I (the PSD program), and that the rule is not used for the 
purpose of preventing exploration and development of the OCS.''

               AN AGENCY OFF-COURSE FROM STATUTORY INTENT

    Unfortunately, EPA and environmental extremists have 
strayed from the narrow public health intent of the law. For 
example, in deciding whether to grant an air permit, the agency 
has chosen to focus on offshore emissions rather than the 
onshore impact. However, it is onshore where the public resides 
(any on-site occupational concerns are addressed by other 
agencies such as OSHA) and thus is where compliance with the 
NAAQS is measured. In addition, environmental extremists have 
attempted to apply the lengthier stationary source requirements 
to the ships that come and go from the drilling ship. From a 
public health standpoint, there is little to be gained in doing 
so, as these vessels are already regulated as mobile sources. 
In both of these instances, the process is being complicated, 
and for reasons divorced from the legitimate public health 
purpose embodied in section 328.
    EPA has also increased permitting delays by creating 
additional layers of bureaucracy within the agency, namely 
through its Environmental Appeals Board (EAB). Although the EAB 
is part of EPA, the agency asserts that it is not responsible 
for EAB delays in granting usable permits that would allow 
exploration to proceed. Such intra-agency delays were never 
intended under section 328.
    The fact that section 328 is now being used to prevent 
exploration is clearly seen in the years-long history of 
Shell's leases in the Alaska OCS. Unlike other parts of the OCS 
that are statutorily closed to leasing, DOI has issued leases 
to Shell Oil for the Beaufort and Chukchi Seas. Some of these 
leases date back to 2005, and Shell has complied with the many 
requirements imposed by DOI and others, including 35 permits. 
Yet, Shell has failed to obtain the necessary air permit from 
EPA, after five years of trying, and the project has been 
brought to a halt as a result.
    EPA's heightened concern about Alaska's air quality is out 
of place. The state has some of the nation's most pristine air 
and is in attainment, by a wide margin, with all of the CAA's 
NAAQS. In the context of the vast onshore and offshore expanses 
in the northern part of the state, where there are very few 
inhabitants and sources of emissions, it is not plausible to 
argue that transient emissions from offshore drilling 
activities pose so serious a threat that the requirements of 
section 328 still cannot be met. It should be noted that 
Alaska's entire Congressional delegation, as well as its state 
government, testified in favor of granting the air permits and 
allowing Alaska OCS exploration to proceed.

                THE BENEFITS OF EXPLORING THE ALASKA OCS

    Alaska's OCS is estimated to contain 27 billion barrels of 
recoverable oil. According to testimony of Oliver Goldsmith of 
the University of Alaska Anchorage, pursuit of this energy 
could create an average of 35,000 permanent jobs in Alaska as 
well as 28,500 jobs elsewhere. The potential royalty and tax 
revenues that would accrue to the federal government could 
reach well into the hundreds of billions of dollars. The state 
of Alaska's share could be $17 billion over 50 years.

                                Hearings

    The Subcommittee on Energy and Power on April 13, 2011 held 
a legislative hearing on a discussion draft of the ``Energy and 
Jobs Permitting Act of 2011'' and received testimony from:
           The Honorable Lisa Murkowski, U.S. Senator, 
        Ranking Member, Committee on Energy and Natural 
        Resources
           The Honorable Mark Begich, U.S. Senator
           The Honorable Don Young, Member of Congress
           The Honorable Dan Sullivan, Commissioner, 
        Alaska Department of Natural Resources
           Dr. Scott Goldsmith, Ph.D., Professor, 
        Institute for Social and Economic Studies, University 
        of Alaska Anchorage
           Mr. Richard Glenn, Executive Vice President, 
        Arctic Slope Regional Corporation
           Mr. David Lawrence, Executive Vice 
        President, Exploration and Commercial, Shell
           Mr. Robert Meyers, Senior Counsel, Crowell & 
        Moring, LLP
           Ms. Rosemary Ahtuangaruak, Former Mayor, 
        Nuiqsut, Alaska and
           Mr. Erik Grafe, Staff Attorney, Earthjustice
    The Subcommittee on Energy and Power on May 13, 2011 held a 
second legislative hearing on the discussion draft of the 
``Energy and Jobs Permitting Act of 2011'' and received 
testimony from:
           Ms. Gina McCarthy, Assistant Administrator, 
        Office of Air and Radiation, U.S. Environmental 
        Protection Agency
           Mr. Lynn Westfall, Executive Vice President, 
        Turner, Mason & Company
           Mr. Ali Mirzakhalili, Director, Division of 
        Air Quality, Delaware Department of Natural Resources 
        and Environmental Control
           Mr. Brian T. Turner, Assistant Executive 
        Officer for Federal Climate Policy, California Air 
        Resources Board, and
           Mr. Robert Meyers, Senior Counsel, Crowell & 
        Moring, LLP.

                        Committee Consideration

    On April 6, 2011, Representative Gardner released a 
discussion draft of the ``Jobs and Energy Permitting Act of 
2011'' (``JEPA'').
    On May 24, 2011, the Subcommittee on Energy and Power 
reported JEPA and favorably recommended it to the full 
committee by a voice vote. During the markup, three amendments 
were offered, of which none were adopted.
    On May 26, 2011, Mr. Gardner and Mr. Green, together with 
other members, introduced JEPA, with amendment, as H.R. 2021.
    On June 1, 2011 and June 2, 2011, the Committee on Energy 
and Commerce met in open markup session. During the markup, 
five amendments were offered, of which none were adopted. On 
June 2, 2011, the Committee ordered H.R. 2021 favorably 
reported to the House.

                            Committee Votes

    Clause 3(b) of rule XII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Upton to order H.R. 2021 reported to the House, 
as amended, was agreed to by a record vote of 34 yeas and 14 
nays. The following reflects the recorded votes taken during 
the Committee consideration, including the names of those 
Members voting for and against.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee made findings that are 
reflected in this report.

         Statement of General Performance Goals and Objectives

    H.R. 2021 amends the Clean Air Act regarding air pollution 
from Outer Continental Shelf activities.

    New Budget Authority, Entitlement Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
2021, the Jobs and Energy Permitting Act of 2011, would result 
in no new or increased budget authority, entitlement authority, 
or tax expenditures or revenues.

                                Earmarks

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI, 
the Committee finds that H.R. 2021, the Jobs and Energy 
Permitting Act of 2011, contains no earmarks, limited tax 
benefits, or limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                      June 8, 2011.
Hon. Fred Upton,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2021, the Jobs and 
Energy Permitting Act of 2011.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 2021--Jobs and Energy Permitting Act of 2011

    H.R. 2021 would make several amendments to the Clean Air 
Act related to air pollution stemming from oil exploration in 
the Outer Continental Shelf (OCS). Those amendments include 
specifying that air emission impacts are to be measured onshore 
and clarifying that any drilling vessel must be regulated as a 
stationary source once drilling starts. (A stationary source is 
a fixed-site producer of air pollution that is regulated by the 
Clean Air Act.) In addition, H.R. 2021 would clarify that the 
Environmental Appeals Board of the Environmental Protection 
Agency (EPA) does not have the authority to consider permits 
for OCS exploration; rather, under the bill EPA would be 
required to take final action related to granting or denying a 
permit within six months after a completed application is 
filed.
    Based on information from EPA, CBO expects that 
implementing this legislation would have no significant impact 
on the federal budget. Pay-as-you-go procedures do not apply 
because the bill would not affect direct spending or revenues.
    H.R. 2021 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Susanne S. 
Mehlman. This estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

               Section-by-Section Analysis of Legislation


Section 1: Short title

    Section 1 provides the short title for the legislation, the 
``Jobs and Energy Permitting Act of 2011.''

Section 2: Air Quality Measurement

    Section 2 amends section 328(a)(1) of the Clean Air Act 
(``CAA'') to clarify that the air quality impacts of any Outer 
Continental Shelf source (``OCS Source'') are to be measured 
solely with respect to the impacts in the corresponding onshore 
area.

Section 3: OCS Source

    Section 3 amends section 328(a)(4)(C) of the CAA to clarify 
that while the emissions from any vessel servicing or 
associated with an OCS Source are to be considered direct 
emissions from such source, such vessels are not subject to 
emissions control requirements under the CAA's Prevention of 
Significant Deterioration of Air Quality Program. Also, section 
3 makes clear that an OCS Source is established at the time 
when drilling commences and ceases to exist when drilling 
activity ends.

Section 4: Permits

    Section 4 amends section 328 of the CAA by adding a new 
subsection that requires final agency action be taken on 
platform or drill ship exploration OCS Source permits no later 
than 6 months after a completed application is filed, with no 
administrative stay of the permit after such time period. In 
addition, the new subsection states expressly that the 
Environmental Appeals Board of the Environmental Protection 
Agency does not have authority to consider platform or drill 
ship exploration OCS Source permits. Final agency action is to 
be considered nationally applicable under section 307(b) of the 
CAA without additional administrative review except for 
reconsideration filed by the applicant under section 
307(d)(7)(B) of the CAA.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

CLEAN AIR ACT

           *       *       *       *       *       *       *


TITLE III--GENERAL

           *       *       *       *       *       *       *


SEC. 328. AIR POLLUTION FROM OUTER CONTINENTAL SHELF ACTIVITIES.

  (a)(1) Applicable Requirements for Certain Areas.--Not later 
than 12 months after the enactment of the Clean Air Act 
Amendments of 1990, following consultation with the Secretary 
of the Interior and the Commandant of the United States Coast 
Guard, the Administrator, by rule, shall establish requirements 
to control air pollution from Outer Continental Shelf sources 
located offshore of the States along the Pacific, Arctic and 
Atlantic Coasts, and along the United States Gulf Coast off the 
State of Florida eastward of longitude 87 degrees and 30 
minutes (``OCS sources'') to attain and maintain Federal and 
State ambient air quality standards and to comply with the 
provisions of part C of title I. For such sources located 
within 25 miles of the seaward boundary of such States, such 
requirements shall be the same as would be applicable if the 
source were located in the corresponding onshore area, and 
shall include, but not be limited to, State and local 
requirements for emission controls, emission limitations, 
offsets, permitting, monitoring, testing, and reporting, except 
that any air quality impact of any OCS source shall be measured 
or modeled, as appropriate, and determined solely with respect 
to the impacts in the corresponding onshore area. New OCS 
sources shall comply with such requirements on the date of 
promulgation and existing OCS sources shall comply on the date 
24 months thereafter. The Administrator shall update such 
requirements as necessary to maintain consistency with onshore 
regulations. The authority of this subsection shall supersede 
section 5(a)(8) of the Outer Continental Shelf Lands Act but 
shall not repeal or modify any other Federal, State, or local 
authorities with respect to air quality. Each requirement 
established under this section shall be treated, for purposes 
of sections 113, 114, 116, 120, and 304, as a standard under 
section 111 and a violation of any such requirement shall be 
considered a violation of section 111(e).

           *       *       *       *       *       *       *

  (4) Definitions.--[For purposes of subsections (a) and (b)] 
For purposes of subsections (a), (b), and (d)--
          (A) * * *

           *       *       *       *       *       *       *

          (C) Outer continental shelf source.--The terms 
        ``Outer Continental Shelf source'' and ``OCS source'' 
        include any equipment, activity, or facility which--
                  (i) * * *

           *       *       *       *       *       *       *

        Such activities include, but are not limited to, 
        platform and drill ship exploration, construction, 
        development, production, processing, and 
        transportation. For purposes of this subsection, 
        emissions from any vessel servicing or associated with 
        an OCS source, including emissions while at the OCS 
        source or en route to or from the OCS source within 25 
        miles of the OCS source, [shall be considered direct 
        emissions from the OCS source] shall be considered 
        direct emissions from the OCS source but shall not be 
        subject to any emission control requirement applicable 
        to the source under subpart 1 of part C of title I of 
        this Act. For platform or drill ship exploration, an 
        OCS source is established at the point in time when 
        drilling commences at a location and ceases to exist 
        when drilling activity ends at such location or is 
        temporarily interrupted because the platform or drill 
        ship relocates for weather or other reasons.

           *       *       *       *       *       *       *

  (d) Permit Application.--In the case of a completed 
application for a permit under this Act for platform or drill 
ship exploration for an OCS source--
          (1) final agency action (including any 
        reconsideration of the issuance or denial of such 
        permit) shall be taken not later than 6 months after 
        the date of filing such completed application;
          (2) the Environmental Appeals Board of the 
        Environmental Protection Agency shall have no authority 
        to consider any matter regarding the consideration, 
        issuance, or denial of such permit;
          (3) no administrative stay of the effectiveness of 
        such permit may extend beyond the date that is 6 months 
        after the date of filing such completed application;
          (4) such final agency action shall be considered to 
        be nationally applicable under section 307(b); and
          (5) judicial review of such final agency action shall 
        be available only in accordance with such section 
        307(b) without additional administrative review or 
        adjudication.

           *       *       *       *       *       *       *


                     DISSENTING VIEWS ON H.R. 2021

    Under Section 328 of the Clean Air Act, companies that want 
to conduct new exploratory drilling operations in the U.S. 
Outer Continental Shelf (OCS) must obtain permits under the 
Clean Air Act prevention of significant deterioration (PSD) 
program if the operations will emit more than 250 tons of an 
air pollutant. The ``Jobs and Energy Permitting Act of 2011,'' 
as reported by the Committee on Energy and Commerce, would make 
several changes to how EPA and state authorities operating 
delegated programs can issue PSD permits for offshore 
exploratory drilling operations and restrict how concerned 
stakeholders can challenge those permits.
    This bill was drafted to facilitate the permitting process 
for Shell in the Arctic waters off the coast of Alaska. The 
bill, however, would affect the regulatory structure relating 
to more than 20 states and territories and could affect air 
quality in coastal states other than Alaska. Representatives of 
the states of California and Delaware testified to their 
concerns about the potential impact of this bill within their 
borders. Brian Turner from the California Air Resources Board 
testified that the bill ``could have far-reaching unintended 
consequences on existing effective protections for public 
health in California.''\1\ Ali Mirzakhalili from the Delaware 
Department of Natural Resources and Environmental Control's 
Office of Air Quality stated that the ``proposed constraints 
placed on states'' rights and authorities will adversely affect 
our state's ability to protect public health and welfare from 
harmful effects of air pollution.''\2\
---------------------------------------------------------------------------
    \1\Testimony of Brian Turner, California Air Resources Board, 
before the Subcommittee on Energy and Power, Committee on Energy and 
Commerce, Hearing on the American Energy Initiative: Discussion Draft 
of H.R. __, the Jobs and Energy Permitting Act of 2011, 112th Cong. 
(May 13, 2011) (hereinafter ``CARB Testimony'').
    \2\Testimony of Ali Mirzakhalili, Director, Office of Air Quality, 
Delaware Department of Natural Resources and Environmental Control, 
before the Subcommittee on Energy and Power, Committee on Energy and 
Commerce, Hearing on the American Energy Initiative: Discussion Draft 
of H.R. __, the Jobs and Energy Permitting Act of 2011, 112th Cong. 
(May 13, 2011) (hereinafter ``Delaware Testimony'').
---------------------------------------------------------------------------

                        I. Purpose of H.R. 2021

    This bill's supporters have stated that Shell has tried for 
five years to obtain the necessary air permits from EPA for its 
proposed Arctic drilling operation. Congressman Gardner, the 
bill's lead sponsor, and others have cited this five-year delay 
as a justification for the proposed legislation.\3\
---------------------------------------------------------------------------
    \3\See, e.g., Committee on Energy and Commerce, Subcommittee on 
Energy and Power, The American Energy Initiative: H.R. __, the Jobs and 
Energy Permitting Act of 2011, 112th Cong. (May 13, 2011).
---------------------------------------------------------------------------
    However, on May 13, 2011, EPA Assistant Administrator Gina 
McCarthy testified before the Subcommittee on Energy and Power 
about the legislation. She noted in response to questions that 
``every time Shell has applied for a permit, a permit has been 
issued by the agency within 3 to 6 months of that permit 
application being complete.'' She also noted that Shell ``has 
consistently revised the request, changed the project, changed 
what sea they want to drill in.''\4\
---------------------------------------------------------------------------
    \4\Testimony of Regina McCarthy, Assistant Administrator for Air 
and Radiation, U.S. Environmental Protection Agency, before the 
Subcommittee on Energy and Power, Committee on Energy and Commerce, 
112th Cong. (May 13, 2011) (hereinafter ``McCarthy Testimony'').
---------------------------------------------------------------------------
    Hearing that testimony, Ranking Member Waxman and Ranking 
Member Rush wrote to Assistant Administrator McCarthy and asked 
her to document the timeline surrounding Shell's application 
for a Clean Air Act permit in the Arctic. Her response 
demonstrates the following and casts doubt on the need for this 
legislation:\5\
---------------------------------------------------------------------------
    \5\Letter from Assistant Administrator Gina McCarthy, U.S. EPA, to 
Ranking Member Henry A. Waxman (June 1, 2011).
---------------------------------------------------------------------------
     EPA has finalized Shell's permits quickly. The two 
Shell permits at issue--major source permits for the Discoverer 
drillship in the Chukchi and Beaufort Seas--were proposed and 
finalized within 3-4 months of receiving completed 
applications. Both went from submission of a completed 
application to a decision by the Environmental Appeals Board 
within approximately one year.
     Shell pulled its application to drill with the 
Discoverer in the Beaufort Sea for two years. Shell first 
proposed drilling with the Discoverer in the Beaufort Sea in 
December 2006 but decided to defer action on this application 
in late 2007. Shell did not file a new permit application to 
use this drillship in the Beaufort Sea until January 18, 2010. 
EPA finalized this permit shortly thereafter on April 9, 2010.
     Shell delayed final agency action on a permit for 
the Discoverer in the Chukchi Sea by submitting insufficient 
permit applications. Shell initially filed a permit application 
for the Discoverer in the Chukchi Sea in December 2008 but had 
to re-file the application in September 2009 when data showed 
that the operation would violate air quality standards for fine 
particles. This new permit application was both incomplete and 
requested substantial changes to the company's operations. 
Shell did not provide all necessary information until the end 
of December 2009. EPA finalized the permit shortly thereafter 
on March 31, 2010.
    For these and other reasons outlined in EPA's response, it 
is misleading to suggest that Shell submitted an application to 
drill in the Beaufort and Chukchi Seas five years ago and has 
been waiting ever since. Rather, Shell has apparently pulled 
applications, modified its proposed operations, and changed its 
target drilling sites on numerous occasions in this time 
period. Every time Shell changed its plans, EPA had to adjust 
its assessment of the potential impacts on air quality and 
public health.
    These facts cast doubt on the stated purpose of and need 
for the proposed legislation.

                    II. Section-by-Section Analysis


                 A. SECTION 2: AIR QUALITY MEASUREMENT

    Section 2 amends section 328(a)(1) of the Clean Air Act to 
clarify that the air quality impacts of any Outer Continental 
Shelf source (``OCS source'') are to be measured solely with 
respect to the impacts in the corresponding onshore area.
    This new language would allow a drillship, for example, to 
emit pollution at relatively high levels, while the need for 
pollution controls would be determined based only on the 
diluted quantity of pollution assumed to reach the shore. This 
language removes air quality protections for near-shore areas 
that have extensive human activity. For example, in Alaska, 
native populations spend significant time offshore engaging in 
subsistence whaling and fishing, and the Santa Barbara Channel 
is full of recreational boaters and fishermen. As the 
California Air Resources Board stated in testimony before the 
Subcommittee, this ``procedural change does not remove any of 
the pollution from actually reaching California and the 
associated decrement to our ambient air quality, but it does 
remove the Districts' ability to protect recreational, fishing, 
and other ocean users from OCS emissions.''\6\ EPA also noted 
in testimony that ``not requiring compliance with health-based 
air quality standards at any point off the shore line . . . 
could result in significant human exposure to air pollution 
from OCS sources, including nitrogen dioxide, particles, sulfur 
dioxide, and pollution that causes ozone.''\7\
---------------------------------------------------------------------------
    \6\CARB Testimony.
    \7\McCarthy Testimony.
---------------------------------------------------------------------------
    In his response to questions for the record, Ali 
Mirzakhalili of the Delaware Department of Natural Resources 
noted that measuring impacts at the ``corresponding onshore 
area'' could be particularly confusing along the Atlantic 
coast, where numerous states lay in close proximity. He stated 
that an OCS source off the coast of Delaware could have the 
greatest air quality impact in New Jersey or Maryland, but, as 
written, the bill could prevent these affected states from 
requiring emissions controls.\8\
---------------------------------------------------------------------------
    \8\Ali Mirzakhalili, Director, Office of Air Quality, Delaware 
Department of Natural Resources and Environmental Control, responding 
to Ranking Member Henry Waxman's Questions for the Record (June 15, 
2011).
---------------------------------------------------------------------------
    Section 2 also has the effect of applying more lenient 
standards to offshore sources than onshore sources. In issuing 
its permits to Shell, EPA Region 10 required Shell to show 
compliance with ambient air quality standards at the rail of 
the drillship. This is consistent with how EPA permits onshore 
facilities, which have to demonstrate compliance at the 
fenceline. The California Air Resources Board testified that 
when ``the rules for OCS sources are more lenient that those 
within the State, California's experience is that the tension 
between better-controlled onshore industry and stakeholders and 
the more lax federal OCS regulation will lead to increased 
disputes, project delays and expense, and permit denials.''\9\ 
Similarly, EPA noted that if OCS sources are not required to 
use pollution controls, ``any resulting degradation of air 
quality could result in the need for more stringent controls 
for onshore sources.''\10\
---------------------------------------------------------------------------
    \9\CARB Testimony.
    \10\Testimony of Regina McCarthy, Assistant Administrator for Air 
and Radiation, U.S. Environmental Protection Agency, before the 
Subcommittee on Energy and Power, Committee on Energy and Commerce, 
112th Cong. (May 13, 2011).
---------------------------------------------------------------------------
    EPA disagrees that the statute, legislative history, and 
rulemaking record establish that OCS sources only have to 
comply with the NAAQS and PSD increments onshore. EPA stated 
the following in response to an assertion that EPA erroneously 
required Shell to demonstrate the air quality impact of its 
operations at the rail of the drillship rather than solely 
onshore:\11\
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    \11\``U.S. EPA, Region 10, Response to Comments for Outer 
Continental Shelf PSD Permit No. R10OCS/PSD-AK-09-01 (Mar. 31, 2010).

          While EPA agrees that the legislative history 
        evidences Congress' concern for protection of onshore 
        air quality, the actual enacted statutory language 
        never uses the term ``onshore'' but rather simply 
        requires EPA to promulgate regulations to attain and 
        maintain ambient standards and comply with the 
        provisions of Part C of Title I of the CAA (the 
        provisions for prevention of significant deterioration 
        of air quality). Nothing in the statute precludes or 
        limits EPA's discretion in how it structures the 
        required regulations to comply with the statutory 
        directive. EPA believes that it has the authority to 
        adopt regulations, and has adopted regulations, that 
        require compliance with the NAAQS and increments at all 
        locations, both offshore and onshore.

                        B. SECTION 3: OCS SOURCE

    Section 3 makes two significant changes to how Clean Air 
Act Section 328 applies to offshore drilling operations.

1. Definition of OCS Source

    Under current law, an ``OCS source'' includes vessels that 
are ``permanently or temporarily attached to the seabed and 
erected thereon and used for the purposes of exploring, 
developing or producing resources therefrom'' or ``physically 
attached to an OCS facility.''\12\
---------------------------------------------------------------------------
    \12\40 C.F.R. Sec. 55.2.
---------------------------------------------------------------------------
    Section 3 of the bill amends section 328 of the CAA to 
specify that an OCS source is established at the time when 
drilling commences and ceases to exist when drilling activity 
ends. The California Air Resources Board testified that 
changing the definition of OCS source could ``artificially 
limit'' the timeframe for considering emissions from a project 
and could ``result in some entire projects falling beneath 
regulatory applicability thresholds, thus avoiding control 
requirements and significantly increasing air pollution.''\13\ 
The Delaware Department of Natural Resources and Environmental 
Control testified that it is a ``misconception that sources 
that operate for a short duration of time do not significantly 
affect air quality,'' noting that ``uncontrolled sources 
operating for a single day can cause or contribute to 
exceedances of health based air quality standards.''\14\
---------------------------------------------------------------------------
    \13\CARB Testimony.
    \14\Delaware Testimony.
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2. Application of Emissions Controls to Support Vessels

    In addition, the bill specifies that vessels servicing or 
associated with a drillship or drilling platform, such as ice 
breakers and the oil spill response vessels, would not be 
subject to best available control technology (BACT) emission 
reduction requirements or other requirements adopted under the 
PSD program. The applicant would have to factor in the 
emissions from the associated vessels when determining whether 
the drilling operation is subject to the PSD program and if it 
meets state and national air quality standards. The permitting 
authority, however, could not require the applicant to apply 
BACT to reduce pollution from these vessels.
    These associated vessels often comprise the bulk of a 
drilling operation's pollution. For example, Shell's proposed 
Arctic operations include two ice breakers, an oil spill 
response fleet of four or five vessels, and a supply ship. 
Shell estimated that its Chukchi operations would emit 1,188 
tons per year of nitrogen oxides;\15\ Shell's Beaufort 
operations would emit an estimated 1,371 tons per year of 
nitrogen oxides.\16\ The associated vessels would contribute 
96% of the total emissions from these drilling operations.\17\
---------------------------------------------------------------------------
    \15\U.S. EPA Region 10, Statement of Basis for Proposed Outer 
Continental Shelf Prevention of Significant Deterioration, Permit No. 
R10OCS/PSD-AK-09-01, Appendix A (Jan. 8, 2010).
    \16\U.S. EPA Region 10, Statement of Basis for Proposed Outer 
Continental Shelf Prevention of Significant Deterioration, Permit No. 
R10OCS/PSD-AK-2010-01, Appendix A (Feb. 17, 2010).
    \17\See supra notes 15 and 16.
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    The California Air Resources Board is concerned that this 
language could exempt many non-motive engines from emissions 
controls. For example, crane engines on marine vessels are 
regulated as stationary engines under Santa Barbara County Air 
Pollution Control District Rule 333 and the CARB Stationary 
Internal Combustion Engine Air Toxics Control Measure. Such 
engines are subject to permit requirements under PSD and are 
therefore subject to BACT if their potential to emit exceeds 
certain thresholds.\18\ This bill could prevent states and 
localities from applying such emission control standards on 
vessels servicing a drilling operation. In his response to 
questions for the record, Ali Mirzakhalili of the Delaware 
Department of Natural Resources wrote that excluding these 
vessels from emissions controls ``could force a state like 
Delaware to meet its air quality obligations by offsetting the 
vessel's emissions on the backs of its already tightly 
regulated stationary sources. This will have an adverse and 
unfair economic impact on Delaware and other coastal 
states.''\19\
---------------------------------------------------------------------------
    \18\CARB Testimony.
    \19\Ali Mirzakhalili, Director, Office of Air Quality, Delaware 
Department of Natural Resources and Environmental Control, responding 
to Ranking Member Henry Waxman's Questions for the Record (June 15, 
2011).
---------------------------------------------------------------------------
    This language also could bar the application of other rules 
adopted under subpart 1 of part C of Title I of the Clean Air 
Act. For example, the California Air Resources Board has 
promulgated a harbor craft rule that is designed to help 
coastal areas come into attainment with the ozone and 
particulate matter air quality standards.\20\ The bill could 
prevent California's air quality districts from incorporating 
CARB's statewide maritime rules, such as the commercial harbor 
craft and ocean-going vessel regulations, into PSD permits.\21\
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    \20\California Air Resources Board, Regulations to Reduce Emissions 
from Diesel Engines on Commercial Harbor Craft Operated Within 
California Waters and 24 Nautical Miles of the California Baseline 
(Oct. 20, 2008) (online at www.arb.ca.gov/regact/2007/chc07/chc07.htm).
    \21\CARB Testimony.
---------------------------------------------------------------------------
    The bill's supporters have stated that Title II is adequate 
to control emissions from these sources. During Subcommittee 
hearings on this bill, one of the witnesses, Robert Meyers, 
noted that vessels servicing the OCS source--such as supply 
ships and ice breakers--are regulated under Title II of the 
Clean Air Act and therefore require no additional emissions 
controls as part of the OCS source. Ranking Member Waxman and 
Ranking Member Rush wrote to Assistant Administrator McCarthy 
and asked her to clarify how Title II applies to the permitting 
of OCS drilling activities. She stated the following in her 
written response:\22\
---------------------------------------------------------------------------
    \22\Letter from Assistant Administrator Gina McCarthy, U.S. EPA, to 
Ranking Member Henry A. Waxman (June 1, 2011).

          While it is true that Title II regulations apply to 
        certain vessels which may be used in OCS activities, it 
        is not an accurate representation to say that, in the 
        absence of the OCS permitting process, these vessels 
        would still be regulated under the Clean Air Act. The 
        OCS permitting process for Shell's operations has 
        resulted in permit requirements for the support and 
        service vessels that are, in some instances, more 
        protective of public health than EPA can require under 
        Title II of the Clean Air Act.
          Shell's operations include support and service 
        vessels, such as icebreakers, that have not been 
        regulated under Title II of the Clean Air Act. Many of 
        the large vessels, such as icebreakers, are foreign-
        flagged vessels. Title II engine requirements/
        regulations do not apply to foreign-flagged vessels. 
        Instead, as part of our comprehensive marine program, 
        we have relied on similar MarPol Annex VI engine 
        standards through the International Maritime 
        Organization (IMO). Those standards, like our Title II 
        CAA standards, apply primarily to new vessels. . . .
          Shell's actions in response to the [Environmental 
        Appeals Board's] remand of the Discoverer permits are 
        illustrative of the additional environmental protection 
        provided by the OCS permit process compared to Title 
        II. Since the remand, Shell has agreed to add controls 
        to one icebreaker to reduce both NOX and 
        PM2.5 emissions. These additional controls will reduce 
        NOX emissions from the icebreaker by 96% and 
        PM2.5 emissions by 82%. Additional restrictions 
        requested by Shell for emissions from the Discoverer 
        and other support vessels will further reduce all 
        emissions from the project (for example, total 
        NOX emissions will be reduced by 72%).
          As a result of the OCS permitting process, Shell is 
        using cleaner fuel than is required under Title II of 
        the Clean Air Act or international law. When the 
        Discoverer drill ship is an OCS source, the permit 
        requires all of the engines on the Discoverer and all 
        of the engines on the service and support vessels to 
        use diesel fuel that contains no more than 15 ppm 
        sulfur. Absent the OCS permit process, vessels in the 
        Arctic using diesel fuel bought outside the United 
        States legally could have fuel sulfur levels as high as 
        35,000 ppm until 2020 and 5,000 ppm thereafter under 
        international law. Absent the OCS permit process, for 
        vessels that buy diesel in the United States, the fuel 
        could contain up to 500 ppm sulfur until 2014, at which 
        time it can contain no more than 15 ppm.

    Essentially, Title II alone may not be adequate to achieve 
necessary emissions reductions from the vessels servicing and 
associated with offshore drilling operations.

                         C. SECTION 4: PERMITS

    Section 4 of the bill would make significant changes to the 
process for reviewing and permitting offshore exploratory 
drilling operations.

1. Six Month Deadline for Final Agency Action

    Section 4 requires final agency action be taken on platform 
or drill ship exploration OCS source permits no later than six 
months after a completed application is filed, with no 
administrative stay of the permit after such time period.
    Responding to questions before the Subcommittee, Assistant 
Administrator Gina McCarthy stated that ``it is not possible'' 
for EPA to evaluate a permit application, set source-specific 
air pollution limits, allow for public comment, and provide for 
administrative review within a six-month timeframe.\23\ Given 
these time constraints, Ms. McCarthy stated that the agency 
could issue a permit without adequate support, thereby reducing 
the permit's defensibility in court and increasing the 
likelihood that EPA and the applicant will have to ``start 
again at square one.''\24\ This short timeline also would limit 
public participation. Currently, EPA generally provides 30 to 
60 days for public comment on a proposed permit action, 
depending on the complexity of the issues and the degree of 
public interest. The timing required by the proposed 
legislation would effectively preclude providing any more than 
30 days for public comments.
---------------------------------------------------------------------------
    \23\McCarthy Testimony.
    \24\Id.
---------------------------------------------------------------------------
    While this provision does not bar review of state permit 
decisions by state or local hearing boards, the six-month 
deadline may effectively limit or eliminate such administrative 
appeals at the state level as well. In Delaware, the state 
generally issues stationary source permits within six months of 
filing of a complete application, but review times vary based 
on the complexity of the pollution source. According to the 
Delaware Department of Natural Resources and Environmental 
Control, this six-month timeframe does not guarantee adequate 
time for permit drafting, review with sources, public 
participation, and administrative review.\25\ Administrative 
appeals of California permits are brought to the local air 
pollution district's hearing board, which typically hears and 
resolves appeals within 30 days or a few months, depending on 
the district and complexity of the application.\26\ In 
addition, for state authorities operating delegated programs, 
this timing may be too short to allow compliance with state 
mandates, such as the California Environmental Quality Act.
---------------------------------------------------------------------------
    \25\Delaware Testimony.
    \26\Briefing by the Santa Barbara County Air Pollution Control 
District and South Coast Air Quality Management District to Energy and 
Commerce Committee Democratic Staff (Apr. 11, 2011).
---------------------------------------------------------------------------

2. Administrative and Judicial Review

    Since 1980, permit applicants and others have been allowed 
to appeal a permit decision administratively within EPA, prior 
to any judicial review. This promotes consistency across the 
national permitting program and provides a faster and more 
affordable alternative to litigation. In 1992, President George 
H.W. Bush Administration's EPA established the Environmental 
Appeals Board (the Board) to hear all administrative appeals to 
EPA. This replaced the prior approach of making administrative 
appeals directly to the Administrator.\27\
---------------------------------------------------------------------------
    \27\U.S. EPA, Changes to Regulations to Reflect the Role of the New 
Environmental Appeals Board in Agency Adjudications: Final Rule, 57 
Fed. Reg. 5320 (Feb. 13, 1992).
---------------------------------------------------------------------------
    Section 4 states expressly that the Environmental Appeals 
Board does not have authority to consider platform or drill 
ship exploration OCS source permits. This would prevent 
stakeholders with concerns about a Clean Air Act permit for an 
OCS source from raising those concerns before the Board, which 
has 20 years of experience in the highly technical area of PSD 
permitting. The Board also is more accessible to citizens than 
a court of law. Under current law, if a community of 
subsistence fisherman in Alaska wanted to appeal a permit 
decision before the Board, they could do so without hiring a 
lawyer, and they could attend oral arguments via video 
conference.
    During her testimony before the Subcommittee, Assistant 
Administrator Gina McCarthy described other benefits of the 
Environmental Appeals Board. She stated that the Board's review 
process ``expedites the process of obtaining a final, valid 
permit by facilitating a process that is faster and more 
certain for the applicant in the event of an appeal.''\28\ She 
clarified that rather than adding an extra step that prolongs 
the permit process, the Board ``usually serves as a cheaper, 
faster, more expert substitute for judicial review.''\29\ On 
average, the Board decides PSD appeals in just over five months 
from the filing of the appeal, much faster than judicial cases 
are resolved.\30\ Furthermore, according to Ms. McCarthy, in 
almost all cases, the ``Board's decision resolves the disputes 
and concludes litigation, avoiding protracted federal court 
review.''\31\ Since 1992, only four of the Board's PSD permit 
decisions have been reviewed by a federal court, and no Board 
PSD decision has ever been overturned.\32\
---------------------------------------------------------------------------
    \28\McCarthy Testimony.
    \29\Id.
    \30\Id.
    \31\Id.
    \32\Id.
---------------------------------------------------------------------------
    Section 4 also specifies that final agency action is to be 
considered nationally applicable under section 307(b) of the 
Clean Air Act. This would direct all permit challenges directly 
to the DC Circuit Court of Appeals, rather than following long-
standing rules and practice on judicial venue, which direct 
litigation to the appropriate regional court of appeals.
    The shift of judicial venue from the appropriate regional 
court of appeals to the DC Circuit Court of Appeals would 
require stakeholders with concerns about the purely local air 
quality impacts of a permit decision to come to Washington, DC 
to raise those concerns. California state courts would no 
longer have jurisdiction over judicial appeals to air quality 
permits issued by local agencies. The California Air Resources 
Board testified that forcing ``cash-strapped state and local 
governments to travel 3,000 miles to defend their federally-
delegated permitting decisions is a serious unfunded federal 
imposition. It impairs the ability of these governments to 
conduct the people's business, increases the burden on 
taxpayers, and takes precious resources from other pressing 
priorities.''\33\
---------------------------------------------------------------------------
    \33\CARB Testimony.
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    For the reasons stated above, we dissent from the views 
contained in the Committee's report.

                                   Henry A. Waxman,
                                           Ranking Member.
                                   Jan Schakowsky.
                                   Bobby L. Rush.
                                   Edward J. Markey.
                                   Tammy Baldwin.
                                   Anna G. Eshoo.
                                   John D. Dingell.
                                   Diana DeGette.
                                   Edolphus Towns.
                                   Lois Capps.
                                   Mike Doyle.
                                   Doris O. Matsui.
                                   Frank Pallone, Jr.