Report text available as:

(PDF provides a complete and accurate display of this text.) Tip?


113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-488

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



 
                    PROMOTING NEW MANUFACTURING ACT

                                _______
                                

 June 23, 2014.--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. 4795]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 4795) to promote new manufacturing in the United 
States by providing for greater transparency and timeliness in 
obtaining necessary permits, and for other purposes, having 
considered the same, report favorably thereon without amendment 
and recommend that the bill do pass.

                                CONTENTS

Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     7
Committee Consideration..........................................     7
Committee Votes..................................................     8
Committee Oversight Findings.....................................    12
Statement of General Performance Goals and Objectives............    12
New Budget Authority, Entitlement Authority, and Tax Expenditures    12
Earmark, Limited Tax Benefits, and Limited Tariff Benefits.......    12
Committee Cost Estimate..........................................    12
Congressional Budget Office Estimate.............................    12
Federal Mandates Statement.......................................    14
Duplication of Federal Programs..................................    14
Disclosure of Directed Rule Makings..............................    14
Advisory Committee Statement.....................................    14
Applicability to Legislative Branch..............................    14
Section-by-Section Analysis of the Legislation...................    14
Changes in Existing Law Made by the Bill, as Reported............    15
Minority, Additional, or Dissenting Views........................    16

                          PURPOSE AND SUMMARY

    H.R. 4795, the ``Promoting New Manufacturing Act,'' was 
introduced by Rep. Steve Scalise (R-LA) on May 30, 2014. The 
bill addresses preconstruction permits required under the Clean 
Air Act (CAA) for major stationary sources, and would require 
the Administrator of the Environmental Protection Agency (EPA) 
to take the following actions:
           To publish information regarding the 
        estimated number of permits issued annually and 
        timelines for making final permit decisions;
           When establishing new or revised air quality 
        standards affecting the permitting process, to issue 
        implementing guidance and regulations at the same time; 
        and,
           To report annually to Congress on actions 
        being undertaken by the agency to expedite the 
        processing of permit applications.

                  BACKGROUND AND NEED FOR LEGISLATION

    In his State of the Union speech this year, President Obama 
highlighted new manufacturing projects related to America's 
abundant energy supplies, stating that businesses ``plan to 
invest almost $100 billion in new factories that use natural 
gas.'' He further stated that he would ``cut red tape to help 
[S]tates get those factories built.''
    H.R. 4795 seeks to ensure these new manufacturing 
facilities will be built by improving the process for obtaining 
air permits required under the federal CAA. In particular, the 
bill addresses permits under the CAA's ``New Source Review'' 
(NSR) provisions that require that new or modified facilities 
obtain a preconstruction permit before commencing construction 
and install emissions control equipment as a condition of the 
permit.
    Preconstruction permits for a new major stationary source, 
or a major modification of an existing major stationary source, 
are issued under two permitting programs.\1\ The ``Prevention 
of Significant Deterioration'' (PSD) program applies in 
``attainment'' areas where the air quality meets national 
ambient air quality standards (NAAQS),\2\ or cannot be 
classified as either in ``attainment'' or ``nonattainment'' 
with the NAAQS. The ``Nonattainment NSR'' (NNSR) program 
applies in areas that are not in attainment with the NAAQS.\3\ 
Because the NSR requirements are pollutant-specific, a 
preconstruction permit application may require both PSD and 
NNSR reviews. Collectively, the EPA refers to the PSD and NNSR 
programs as the ``major NSR program.''\4\
---------------------------------------------------------------------------
    \1\The draft legislation applies only to ``Major NSR'' permits for 
major stationary sources. The draft legislation does not apply to the 
``Minor NSR'' program administered by States.
    \2\EPA has established standards for six criteria pollutants: 
carbon monoxide, lead, ozone, particulate matter (PM2.5/PM10), nitrogen 
dioxide (NO2), and sulfur dioxide (SO2). See National Ambient Air 
Quality Standards (NAAQS) available at http://www.epa.gov/air/
criteria.html.
    \3\The PSD and NNSR programs are contained in parts C and D, 
respectively, of Title I of the CAA. See CAA Part C of Title I, 
Sec. Sec. 160-169, 42 U.S.C. Sec. Sec. 7470-7479 (PSD); CAA Part D of 
Title I, Sec. Sec. 171-193, 42 U.S.C. Sec. Sec. 7501-7515 (NNSR). For 
applicable federal regulations, see 40 CFR 51.165, 51.166, 52.21, 52.24 
and part 51, Appendices S and W.
    \4\The PSD program, which applies to criteria pollutants in areas 
in compliance with the NAAQS, as well as certain non-criteria 
pollutants regulated by EPA that do not have a NAAQS (see 40 CFR 
52.21(a)(23)), requires installation of ``Best Available Control 
Technology'' (BACT) technologies, based on a case-by-case determination 
and taking into account cost and other factors. See Prevention of 
Significant Deterioration (PSD) Basic Information available at http://
www.epa.gov/NSR/psd.html. The NNSR program, which applies to criteria 
pollutants in areas that are out of compliance with the NAAQS, includes 
more stringent requirements, including installing ``Lowest Achievable 
Emissions Rate'' (LAER) technologies without taking into account costs 
and other factors, obtaining emissions offsets and achieving a net air 
quality benefit, and an alternatives analysis. See Nonattainment NSR 
Basic Information available at http://www.epa.gov/nsr/naa.html.
---------------------------------------------------------------------------
    Under the major NSR program, EPA establishes the basic 
permitting requirements through federal regulations. Although 
the majority of major NSR permits are issued by State and local 
permitting authorities, EPA also may be the permitting 
authority in certain States.\5\ In instances where the EPA is 
not the permitting authority, EPA may review and submit 
comments on draft permits proposed by State or local permitting 
authorities. The agency maintains a database that tracks 
information relating to major source permits issued by the EPA 
Regional Offices and by State and local air agencies.\6\
---------------------------------------------------------------------------
    \5\In the majority of States, the States have developed NSR 
requirements and procedures that are defined and codified in a State 
Implementation Plan (SIP) approved by EPA. Other States rely on EPA's 
NSR program, and in these States, EPA has delegated authority on behalf 
of the agency (delegated States). In still other States, EPA may be the 
permitting authority. See, e.g. ``Where You Live'' available at http://
www.epa.gov/nsr/where.html.
    \6\See ``RACT/BACT/LAER Clearinghouse'' available at http://
cfpub.epa.gov/rblc/. EPA estimates that the database currently contains 
information for approximately 50 percent of the major NSR permits. See 
EPA Technical Assistance available at http://docs.house.gov/meetings/
IF/IF03/20140528/102284/HMKP-113-IF03-20140528-SD003.pdf. In its annual 
Budget Justification, the EPA reports the percentage of major NSR 
permits within one year. See, e.g. U.S. EPA Fiscal Year 2015 
Justification of Appropriation Estimates available at http://
nepis.epa.gov/Exe/ZyPDF.cgi/P100I0WA.PDF?Dockey=P100I0WA.PDF, at pp. 
224, 829.
---------------------------------------------------------------------------
    By statute, a decision on a PSD permit application is 
required to be made within one year of the filing of a 
completed application. See CAA 165(c), 42 U.S.C. 7454(c). In 
practice, however, the permitting process can take 
significantly longer.\7\ EPA has estimated that during the 
years 2008 through 2012, the percentage of major NSR permits 
issued within one year of receiving a completed permit 
application ranged from 46 percent to 80 percent depending upon 
the year.\8\
---------------------------------------------------------------------------
    \7\See, e.g. EPA Oct. 15, 2012 Memo entitled ``Timely Processing of 
Prevention of Significant Deterioration (PSD) permits when EPA or PSD-
Delegated Air Agency Issues the Permit'' available at http://
www.epa.gov/region7/air/nsr/nsrmemos/timely.pdf (summarizing ``best 
practices and other recommended tools to foster timely and consistent 
permit processing'').
    \8\See U.S. EPA Fiscal Year 2015 Justification of Appropriation 
Estimates available at http:// nepis.epa.gov/Exe/ZyPDF.cgi/
P100I0WA.PDF?Dockey=P100I0WA.PDF, at pp. 224, 829.
---------------------------------------------------------------------------

Pending manufacturing projects and permitting challenges

    There are currently tens of billions of dollars in 
potential new manufacturing projects that have been announced, 
largely due to America's abundant energy supplies.
    At the legislative hearing on the discussion draft of H.R. 
4795,\9\ Lorraine Krupa Gershman, Director of Regulatory and 
Technical Affairs with the American Chemistry Council (ACC), 
testified that ``America's chemical industry is undergoing a 
historic expansion made possible by abundant, affordable 
supplies of natural gas and natural gas liquids from shale 
formations.'' She further testified that:

    \9\The hearing was held on May 21, 2014 before the Energy and Power 
Subcommittee of the Committee on Energy and Commerce.

        [a]s of this week, 177 chemical industry projects, 
        valued at $112 billion in potential new U.S. 
        investment, have been announced. Fully 62 percent of 
        this is foreign direct investment. Within 10 years, the 
        new investments could generate tens of billions of 
        dollars in new chemical industry exports, and hundreds 
        of thousands of permanent new jobs.\10\
---------------------------------------------------------------------------
    \10\The chemical products to be produced are used in many everyday 
products, including food packaging, film, trash bags, diapers, toys, 
housewares, window frames, clothing, detergents carpets, home 
furnishings and apparel, paints, electronics, and gasoline. See ACC, 
May 2013, ``Shale Gas, Competiveness, and New US Chemical Industry 
Investment: An Analysis Based on Announced Projects,'' Appendix 4 
available at http://chemistrytoenergy.com/sites/chemistrytoenergy.com/
files/shale-gas-full-study.pdf.

    Additionally, Ross Eisenberg, Vice President, Energy and 
Resources Policy, National Association of Manufacturers, 
testified that ``the boom in domestic energy production is 
driving major new investment in manufacturing, and contributing 
to increased U.S. competitiveness around the world.'' Further, 
``for manufacturers, this could mean as many as one million new 
jobs by 2025 as we build new iron, steel, cement, fertilizer, 
chemicals, aluminum, plastics, and many other manufacturing 
facilities, as well as the products that are made from these 
materials, so the future is good.''
    While there are billions of dollars in planned new 
manufacturing projects in the United States, they face 
regulatory uncertainty and potential delays in the permitting 
process. At the May 21, 2014 hearing, ACC's Director of 
Regulatory and Technical Affairs, Lorraine Gershman summarized 
these challenges, stating:

          All of these projects must undergo a lengthy and 
        complex environmental permitting process, filled with 
        challenges that could derail the investments. Problems 
        include uncertainty as to the schedule and process for 
        obtaining a final pre-construction permit, and a 
        requirement that companies use emission modeling 
        programs that cannot adequately accommodate site 
        specific data. Once a project is significantly delayed, 
        the project can be scrapped, and companies make plans 
        to proceed elsewhere.

    Similarly, Ken Weiss, Managing Director for Global Air 
Services with Environmental Resources Management (ERM), 
testified that ``[c]ompanies seeking to execute capital 
projects need to be able to develop realistic and predictable 
project timelines'' so that ``equipment can be designed, 
procured, installed, and brought online when expected, and also 
support investment decisions.'' Currently, however, he 
testified that there can be significant delays: ``We routinely 
advise clients that obtaining a PSD permit can take anywhere 
from 1 to 3 years, and that a minimum of 12 to 18 months need 
to be allowed in the project schedule.''\11\
---------------------------------------------------------------------------
    \11\A June 2014 report recently concluded that, despite favorable 
economics, many new manufacturing projects in the chemical industry are 
being delayed for years due, in part, to ``a lengthy and uncertain 
permitting process.'' See ``Unlocking the economic potential of North 
America's energy resources,'' June 2014, Goldman Sachs Global Markets 
Institute available at http://www.goldmansachs.com/our-thinking/our-
conferences/north-american-energy-summit/unlocking-the-economic-
potential-of-north-americas.pdf.
---------------------------------------------------------------------------
    One of the most challenging aspects of the permitting 
process can be new or changing regulatory requirements, 
including new or revised NAAQS. Such new or revised NAAQS apply 
to preconstruction permit applications as soon as the new or 
revised standards become effective, except in limited 
circumstances.\12\ At the same time, EPA's implementing 
regulations and guidance for how to comply with the new or 
revised NAAQS may be significantly delayed.\13\
---------------------------------------------------------------------------
    \12\See, e.g. EPA Oct. 15, 2012 Memo, supra (new or revised NAAQs 
``apply to any final permit issued after the effective dates of the 
requirements unless the EPA has provided for grandfathering of the 
specific requirements for applications pending on the effective date of 
the new requirement''); see also April 1, 2010 Memo available at http:/
/www.epa.gov/region7/air/nsr/nsrmemos/psdnaaqs.pdf (``EPA generally 
interprets the CAA and EPA's PSD permitting program regulations to 
require that each final PSD decision reflect consideration of any NAAQS 
in effect at the time the agency makes a final determination on a 
pending application'').
    \13\For example, EPA published a revised standard for fine 
particulate matter on January 15, 2013 (see National Ambient Air 
Quality Standards for Particulate Matter Final Rule, 78 Fed. Reg. 3086 
((Jan. 15, 2013)), but has yet to issue final implementing regulations 
and guidance. Similarly, for its revised ozone standards issued in 
2008, the agency did not propose implementing regulations until 2013. 
See Implementation of the 2008 National Ambient Air Quality Standards 
for Ozone: State Implementation Plan Requirements, 78 Fed. Reg. 34178 
(June 6, 2013).
---------------------------------------------------------------------------
    At the May 21, 2014 legislative hearing, witnesses 
addressed the potential for permitting delays when EPA changes 
NAAQS and fails to issue timely implementing regulations and 
guidance. ACC's Director of Regulatory and Technical Affairs, 
Lorraine Gershman testified: ``Lacking clear direction from 
EPA, State permitting agencies and manufacturing facilities 
have, at times, been left confused about the 
requirements.''\14\ Similarly, Mr. Weiss testified: ``Guidance 
is necessary, as many technical issues must be addressed in 
determining how to conduct the analyses that can show 
compliance with the ambient air quality standards. This is 
particularly important, as EPA is constantly updating the 
ambient air quality standards.'' He cited to various examples 
of project delays caused by the lack of guidance accompanying 
new, more stringent air quality standards.
---------------------------------------------------------------------------
    \14\Additionally, she testified that even as to earlier issued 
NAAQS:
    EPA is still working to implement some of these standards that they 
have put in place, with the unintended consequences of not having the 
models available, or not having monitoring available to make the 
designations. Areas that are in limbo between standards do not 
necessarily know how to proceed. This holds up permits. A lot of these 
projects come with a substantial amount of financing attached. This 
financing is not available indefinitely, and if these permits aren't 
issued, there are times where the financing will disappear, and the 
projects will therefore not go forward.
---------------------------------------------------------------------------
    For certain preconstruction permits, an additional source 
of delay in the permitting process may be administrative 
appeals to the EPA's Environmental Appeals Board (EAB). In 
particular, for PSD permits issued by EPA or delegated States, 
there is the potential for further delays during the pendency 
of any appeal to the EAB. EPA has estimated that the average 
time for resolution of such appeals is 5 months.\15\
---------------------------------------------------------------------------
    \15\See EPA Oct. 15, 2012 Memo, supra (``EAB review historically 
has taken an average of 5 months from the time a petition is filed to 
the time the EAB issued its decision in the matter''). The EAB has a 
Standing Order giving priority to NSR permit appeals. See EAB Revised 
Order Government Petitions for Review of Clean Air Act New Source 
Review Permits filed March 27, 2013.
---------------------------------------------------------------------------
    At the May 21, 2014 legislative hearing, ACC's Director of 
Regulatory and Technical Affairs, Lorraine Gershman, testified 
that the bill ``represents a step towards a timely, efficient 
and transparent regulatory process.'' NAM's Vice President for 
Energy and Resources Policy, Ross Eisenberg, testified that the 
bill ``takes a pragmatic approach to this very complex issue.'' 
ERM's Managing Partner for Global Air Services, Ken Weiss, 
whose company has extensive experience in the permitting 
process, testified that ``[t]he legislation will remove much 
uncertainty, and related schedule delays from the air emissions 
permitting process for major capital projects, and help ensure 
continued growth in manufacturing in the United States.'' The 
President and Chief Executive Officer of the Small Business & 
Entrepreneurship Council, Karen Kerrigan, testified that 
``Provisions that require the EPA to better monitor, make 
public, and report on the timing of permits, and to provide 
timely and concurrent guidance and rules about how to comply 
with new or revised air quality standards, will establish 
greater clarity and certainty for businesses and investors.''

What the Act Will Do

    H.R. 4795 would provide for the following:

Permitting Dashboard: To provide more transparency regarding 
the preconstruction permit process, the bill directs the EPA 
Administrator to publish on the agency's website estimates of 
the following information: 1) the total number of major NSR 
permits issued annually; 2) the percentage of such permits 
issued within one year after the date of filing of a completed 
permit application; and 3) the average length of time for the 
EPA's EAB to issue final decisions on petitions appealing 
permit decisions. In preparing the report, EPA is not required 
to seek additional information from States and local agencies 
beyond the information already being voluntarily provided to 
the agency's central permitting database.
Timely Rules and Guidance: To ensure timely guidance regarding 
permitting requirements, the bill requires that if the EPA 
Administrator establishes or revises a national ambient air 
quality standard, the agency publish implementing regulations 
and guidance at the same time, including information regarding 
the submittal and consideration of preconstruction permit 
applications. In terms of the information included in the 
regulations and guidance, the Administrator has flexibility to 
include such information as the Administrator determines to be 
necessary and appropriate to assist States, permitting 
authorities and permitting applicants.
Report to Congress: To promote timely review of permit 
applications, the bill directs the EPA Administrator to report 
annually on actions undertaken by the agency to expedite the 
permitting process. In preparing the report, EPA is not 
required to seek additional information from States and local 
agencies beyond the information already being voluntarily 
provided to the agency's central permitting database.

Additional considerations

    At the legislative hearing, and in technical assistance 
comments provided by the EPA on May 27, 2014,\16\ concerns were 
raised that section 3(b) of the bill, which requires that EPA 
issue concurrent implementing regulations and guidance for new 
or revised air quality standards, could create a ``loophole'' 
or ``amnesty'' for new facilities by exempting them from the 
obligation to install stringent control technologies. The 
intent of section 3(b) is to ensure that EPA will be 
accountable when it issues new air quality standards, and that 
regulated entities will have the guidance they need to comply 
with the new standards when the new standards become effective, 
and will not be subject to permit delays.
---------------------------------------------------------------------------
    \16\See EPA Technical Assistance available at http://
docs.house.gov/meetings/IF/IF03/20140528/102284/HMKP-113-IF03-20140528-
SD003.pdf.
---------------------------------------------------------------------------
    The Committee notes that under the bill, the only 
circumstance under the bill in which a new or revised air 
quality standard would not apply to a pending permit 
application is if EPA failed to issue timely guidance relating 
to the permitting process. Under H.R. 4795, even if EPA fails 
to provide such guidance, the bill expressly provides that 
nothing in the bill changes the obligation of new facilities to 
install ``best available control technology'' in attainment 
areas, and the ``lowest achievable emissions rate'' technology 
in nonattainment areas. As a practical matter, it is notable 
that EPA itself ``grandfathers'' in certain preconstruction 
permit applications, as it did when the agency issued its most 
recent revisions to its particulate matter standards in 2012, 
to avoid delaying or derailing projects.
    At the legislative hearing, and in a June 5, 2014 letter 
from the California Air Resources Board, concerns also were 
raised that section 3(b) of the bill would prohibit States or 
local permitting authorities from applying a new or revised 
NAAQS if EPA failed to issue concurrent implementing 
regulations and guidance. As noted above, the intent of section 
3(b) is to ensure that EPA is accountable when issuing new 
federal air quality standards and provides timely guidance to 
permit applicants and permitting authorities. Under the NSR 
program, nothing precludes States or local permitting 
authorities from imposing more stringent requirements pursuant 
to State or local law than the federal standards established by 
EPA.\17\ Accordingly, if a State or local permitting authority 
wanted to apply a new or revised NAAQS even in the absence of 
EPA implementing regulations and guidance, H.R. 4795 would not 
prevent such an approach.
---------------------------------------------------------------------------
    \17\See ``Where You Live'' (``States may develop unique NSR 
requirements and procedures tailored for their air quality needs of 
each area as long as the program is at least as stringent as EPA's 
requirements.'') available at http://www.epa.gov/nsr/where.html.
---------------------------------------------------------------------------

Supporters of the legislation

    Supporters include the American Chemistry Council, National 
Association of Manufacturers, Small Business & Entrepreneurship 
Council, U.S. Chamber of Commerce, and the Industrial Energy 
Consumers of America.

                                HEARINGS

    The Subcommittee held a hearing on the discussion draft of 
H.R. 4795 on May 21, 2014. The Subcommittee received testimony 
from:
           Ms. Lorraine Krupa Gershman, Director, 
        Regulatory & Technical Affairs, American Chemistry 
        Counsel;
           Mr. Ross Eisenberg, Vice President, Energy 
        and Resources Policy, National Association of 
        Manufacturers;
           Mr. Ken Weiss, Global Managing Partner, Air 
        and Climate Change, Environmental Resources Management 
        (ERM);
           Ms. Karen Kerrigan, President and Chief 
        Executive Officer, Small Business & Entrepreneurship 
        Council;
           Mr. John Walke, Senior Attorney and 
        Director, Climate and Clean Air Program, Natural 
        Resources Defense Council; and,
           Mr. Colin O'Mara, Secretary, Delaware 
        Department of Natural Resources and Environmental 
        Control.

                        COMMITTEE CONSIDERATION

    On May 28, 2014 and May 29, 2014, the Subcommittee on 
Energy and Power met in open markup session and forwarded the 
bill to the full Committee by a roll call vote of 14 ayes and 8 
nays. During the markup, two amendments were offered and passed 
by voice vote, two amendments were offered and rejected by 
voice vote, and one amendment was offered and rejected by a 
roll call vote.
    On June 9, 2014 and June 10, 2014, the Committee on Energy 
and Commerce met in open markup session. During the markup, 
three amendments were offered, of which one was withdrawn and 
two were rejected by roll call votes. A motion by Mr. Upton to 
order H.R. 4795, reported to the House, as amended, was agreed 
to by a record vote of 30 ayes and 19 nays.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII 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. 4795 reported to the House, 
without amendment, was agreed to by a roll call vote of 30 ayes 
and 19 nays. The following reflects the roll call votes taken 
during the Committee consideration:


                      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. 4795 provides direction to EPA to improve the 
transparency and timeliness of the preconstruction permit 
process under the Clean Air Act.

   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. 
4795 would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

       EARMARK, LIMITED TAX BENEFITS, AND LIMITED TARIFF BENEFITS

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI 
of the Rules of the House of Representatives, the Committee 
finds that H.R. 4795 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 20, 2014.
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. 4795, the 
Promoting New Manufacturing Act.
    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. 4795--Promoting New Manufacturing Act

    Summary: H.R. 4795 would impose various administrative 
requirements on the Environmental Protection Agency (EPA) aimed 
at increasing the transparency of its decisions and reducing 
delays associated with the permitting process under the Clean 
Air Act's New Source Review (NSR) preconstruction program. 
Under that program, stationary sources of air pollution are 
required to obtain permits prior to building any new facilities 
or making any modifications to existing facilities. Usually, 
NSR permits are issued by state or local air pollution control 
agencies.
    Enacting this legislation would require EPA to perform the 
following activities:
           Present on the agency's website the number 
        of preconstruction permits issued annually, the 
        percentage of such permits issued within one year after 
        filing an application, and the average length of time 
        for EPA's Environmental Appeals Board to resolve 
        administrative appeals;
           Publish regulations and guidance to assist 
        states, permitting authorities, and permitting 
        applicants whenever final or revised national ambient 
        air quality standards are implemented; and
           Submit an annual report to the Congress 
        identifying actions being taken by the agency to 
        expedite the permitting process and the specific 
        reasons for any delays in issuing permits.
    CBO estimates that implementing this legislation would cost 
about $2 million over the 2015-2019 period, subject to the 
availability of appropriated funds. Enacting H.R. 4795 would 
not affect direct spending or revenues; therefore, pay-as-you-
go procedures do not apply.
    H.R. 4795 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the Federal Government: CBO estimates 
that implementing H.R. 4795 would cost $2 million over the next 
five years. The costs of this legislation fall within budget 
function 300 (natural resources and environment).
    Basis of estimate: For this estimate, CBO assumes that H.R. 
4795 will be enacted by the end of 2014 and that the necessary 
amounts to implement the legislation will be appropriated.
    Based on information from EPA, CBO estimates that 
implementing H.R. 4795 would have a small annual cost. Under 
the legislation, EPA would provide permitting data on the 
agency's website and prepare an annual report for the Congress 
using information that is already collected. In addition, EPA 
usually publishes implementing guidance associated with final 
regulations. However, implementing this legislation would 
ensure that such guidance is published concurrently rather than 
after final regulations have been published. On balance, CBO 
estimates that over the 2015-2019 period, implementing this 
bill would cost about $2 million.
    Pay-As-You-Go considerations: None.
    Intergovernmental and private-sector impact: H.R. 4795 
contains no intergovernmental or private-sector mandates as 
defined in UMRA.
    Estimate prepared by: Federal costs: Susanne S. Mehlman; 
Impact on state, local, and tribal governments: Jon Sperl; 
Impact on the private sector: Matthew Denneny.
    Estimate 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.

                    DUPLICATION OF FEDERAL PROGRAMS

    No provision of H.R. 4795 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  DISCLOSURE OF DIRECTED RULE MAKINGS

    The Committee estimates that enacting H.R. 4795 
specifically directs to be completed no rulemakings within the 
meaning of 5 U.S.C. 551 that would not otherwise be issued by 
the agency.

                      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 THE LEGISLATION

Section 1. Short title

    This section provides the short title of ``Promoting New 
Manufacturing Act.''

Section 2. Building and manufacturing projects dashboard

    This section directs the Administrator of the Environmental 
Protection Agency (EPA) to publish in a readily accessible 
location on the agency's website estimates of: (1) the number 
of preconstruction permits issued annually under the Clean Air 
Act's (CAA) New Source Review (NSR) program for major sources, 
including ``Prevention of Significant Deterioration'' and 
``Nonattainment NSR'' permits; (2) the percentage of such 
permits issued within one year after the date of filing of a 
completed application; and (3) the average length of time for 
the EPA's Environmental Appeals Board to resolve administrative 
appeals. Nothing in this section compels the EPA to seek 
additional information from States and permitting agencies 
beyond information voluntarily provided by State and local air 
agencies for EPA's RACT/BACT/LAER Clearinghouse database.

Section 3. Timely issuance of regulations and guidance to address new 
        or revised National Ambient Air Quality Standards in 
        preconstruction permitting:

    This section directs that in publishing any final new or 
revised national ambient air quality standard (NAAQS), the EPA 
Administrator shall publish concurrently implementing 
regulations and guidance, as necessary and appropriate to 
assist States, permitting authorities, and permitting 
applicants. This section also provides that if the 
Administrator fails to publish concurrently final regulations 
and guidance addressing the submittal and consideration of 
permit applications under a new or revised NAAQS, the new or 
revised NAAQS shall not apply to preconstruction applications 
until such final regulations and guidance have been published. 
Nothing in the section shall be construed to eliminate the 
obligation of a preconstruction permit applicant to install 
best available control technology and lowest achievable 
emissions rate technology, as applicable.

Section 4. Report to Congress on actions to expedite review of 
        preconstruction permits:

    This section requires that EPA annually submit a report to 
Congress on actions being taken by the agency to expedite the 
process for issuing preconstruction permits. Nothing in this 
section compels the EPA to seek information beyond information 
voluntarily provided by States and local air agencies in EPA's 
RACT/BACT/LAER Clearinghouse database.

Section 5. Definitions:

    This section contains the following definitions:
    (1) ``Administrator'' means the EPA Administrator.
    (2) ``Best available control technology'' has the meaning 
given that term in CAA section 169(3).
    (3) ``Lowest achievable emissions rate'' has the meaning 
given that term in CAA section 171(3).
    (4) ``Major Emitting Facility'' and ``Major Stationary 
Source'' has the meaning given to those terms in CAA section 
302(j).
    (5) ``National Ambient Air Quality Standard'' means a 
national ambient air quality standard for an air pollutant 
under CAA section 109 that is finalized after the date of 
enactment of the Act.
    (6) ``Preconstruction permit'' means a permit that is 
required under part C or D of title I of the CAA for the 
construction or modification of a major emitting facility or 
stationary source, and includes any such permit issued by the 
EPA or a State, local or tribal permitting authority.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    This legislation does not amend any existing Federal 
statute.

                            DISSENTING VIEWS

                               I. SUMMARY

    H.R. 4795, the ``Promoting New Manufacturing Act,'' does 
nothing to promote new manufacturing or to improve the 
permitting process for new and expanding manufacturing 
facilities. Instead, the bill weakens air quality protections, 
allows more pollution, and threatens public health.
    The Clean Air Act requires major new or expanding sources 
of air pollution to obtain permits with pollution limits before 
the facilities start construction. These preconstruction 
permits ensure that a new or expanded facility will not 
increase local air pollution to levels that violate national 
ambient air quality standards (NAAQS), which the Environmental 
Protection Agency (EPA) sets for six principal air pollutants. 
When EPA updates each air quality standard to reflect the 
latest science, permit applicants have to meet the new, more 
protective standard and show their emissions will not harm 
public health.
    H.R. 4795 creates a loophole in this process. The bill 
establishes imprecise procedural requirements for EPA to follow 
after setting a new air quality standard. If EPA does not meet 
those requirements, then a new or expanding facility can apply 
for a preconstruction permit based on the old air quality 
standard, which is not adequate to protect public health. In 
effect, this bill could give new sources of pollution 
``amnesty'' from new science-based air quality standards.
    This amnesty provision will allow more pollution to enter 
the air, harming public health. It also does not make economic 
sense. Allowing new facilities to pollute more than their fair 
share means that existing industrial facilities may have to do 
more to reduce their emissions if the area is near or in 
nonattainment (exceeding the NAAQS or contributing to a nearby 
area's violation of the NAAQS). It also raises the economy-wide 
cost of cleaning up pollution. As the Clean Air Act has long 
recognized, it is generally far more efficient and cost-
effective to build pollution controls into a facility up front, 
rather than adding them later.
    By setting vague procedural requirements for EPA to follow 
and applying an outdated standard if EPA fails to meet those 
requirements, the bill creates more regulatory uncertainty and 
sets up new avenues for litigation. This will only serve to 
delay preconstruction permitting for manufacturing facilities, 
not expedite it, and it will harm public health in the process.

                             II. BACKGROUND

A. National Ambient Air Quality Standard-Setting process
    The Clean Air Act requires EPA to set NAAQS for certain 
pollutants that endanger public health and the environment. EPA 
sets primary NAAQS at concentration levels sufficient to 
protect the public health with an adequate margin of safety.\1\ 
Essentially, the primary NAAQS identify the level of ambient 
air pollution that is ``safe'' to breathe.
---------------------------------------------------------------------------
    \1\Clean Air Act Sec. 109(b)(1).
---------------------------------------------------------------------------
    EPA sets the NAAQS based on a thorough review of the 
medical and scientific evidence, as well as advice provided by 
an independent scientific review committee.\2\ EPA must review 
each NAAQS every five years and make revisions as 
appropriate.\3\
---------------------------------------------------------------------------
    \2\Id. at Sec. 109(d)(2).
    \3\Id. at Sec. 109(d)(1).
---------------------------------------------------------------------------
    Once EPA establishes a NAAQS for a pollutant, the states 
have primary responsibility for achieving pollution reductions 
to meet the standard.\4\ Within a year after EPA establishes or 
revises a NAAQS, each state must designate areas within its 
borders as in attainment (meeting the NAAQS) or nonattainment 
(exceeding the NAAQS or contributing to a nearby area's 
violation of the NAAQS).\5\ EPA must issue final designations 
within two years of issuing a NAAQS but can take an additional 
year if more information is needed.\6\
---------------------------------------------------------------------------
    \4\Id. at Sec. 107(a).
    \5\Id. at Sec. 107(d)(1)(A). Areas can also be designated as 
``unclassifiable,'' if there is insufficient information available to 
determine whether an area meets a NAAQS.
    \6\Id. at Sec. 107(d)(1)(B).
---------------------------------------------------------------------------
    Within three years of EPA issuing a NAAQS, each state must 
prepare and submit state implementation plans (SIPs) to require 
and enforce pollution reductions sufficient to meet the NAAQS 
in each air quality control region.\7\ If EPA disapproves a SIP 
(or if a state fails to submit a SIP), EPA must promulgate a 
federal implementation plan (FIP), unless the state corrects 
any deficiencies in its SIP as needed to address EPA's 
concerns.\8\
---------------------------------------------------------------------------
    \7\Id. at Sec. 110(a).
    \8\Id. at Sec. Sec. 110(k), 110(c).
---------------------------------------------------------------------------
    EPA has issued and periodically updated general regulations 
establishing requirements for state implementation of the 
NAAQS.\9\ As part of the implementation process, EPA may issue 
additional regulations or guidance to help states and regulated 
entities implement a specific NAAQS, but EPA is not required by 
statute to issue any regulations or guidance on implementation.
---------------------------------------------------------------------------
    \9\40 C.F.R. Sec. 51.
---------------------------------------------------------------------------
B. Preconstruction permitting
    The Clean Air Act requires major new or expanding 
stationary sources of air pollution to obtain permits before 
they start construction. This requirement aims to ensure that a 
new facility, or significant modifications to an existing 
facility, will not significantly increase air pollution above 
levels that are safe to breathe. The preconstruction permitting 
provisions achieve this by: (1) requiring new and modified 
sources to use control technology to reduce their emissions; 
and (2) to assess, and if necessary address, their remaining 
air quality impacts.
    States, not EPA, issue the vast majority of preconstruction 
permits.
    The permitting requirements differ depending on whether the 
new or modified source would be located in an attainment or 
nonattainment area. In clean air areas that meet the NAAQS, the 
facility owner or operator must obtain a preconstruction permit 
under the Prevention of Significant Deterioration (PSD) 
program. The owner or operator must demonstrate that the 
facility is using best available control technology (BACT) and 
that ``emissions from . . . such facility will not cause, or 
contribute to, air pollution in excess of any . . . [NAAQS] in 
any air quality control region.''\10\ As part of the permitting 
process, the facility must conduct an air quality impact 
analysis to show that the new emissions, in combination with 
emissions from other nearby sources, will not cause or 
contribute to a violation of the NAAQS.\11\ If the analysis 
shows that the facility's emissions would drive the area into 
nonattainment, then the facility may have to take additional 
action to lower its emissions impact. The law specifies that 
the permitting agency must grant or deny a PSD permit 
application no later than one year after the completed permit 
application was filed.\12\
---------------------------------------------------------------------------
    \10\Clean Air Act Sec. Sec. 165(a)(3) and (a)(4).
    \11\Id. at Sec. 165(e).
    \12\Id. at Sec. 165(c).
---------------------------------------------------------------------------
    For nonattainment areas, which already have unhealthy air, 
the facility owner or operator must obtain a preconstruction 
permit under the nonattainment new source review (NSR) program. 
The nonattainment NSR program requires the facility to install 
pollution controls sufficient to meet the lowest achievable 
emission rate (LAER), which is the most stringent emission 
limitation required by a state plan or achieved in practice by 
that type of source. The program also requires any proposed new 
emissions from the new or modified facility to be offset by 
reductions from existing sources.\13\ The Clean Air Act does 
not set a time limit for the permitting agency to act on a 
nonattainment NSR permit application.
---------------------------------------------------------------------------
    \13\Id. at Sec. 173.
---------------------------------------------------------------------------
    If the applicant or stakeholders disagree with a final 
permit decision, they can appeal the decision. The venue for 
this appeal depends on which permitting authority issued the 
preconstruction permit. Most states operate their own 
permitting programs, which are incorporated in their state 
implementation plans. In these states, appeals are handled by 
state or local administrative review boards and state courts. A 
few states choose to operate EPA's permitting program through 
delegated authority. For permits issued by these states, and 
the few permits issued by EPA, the applicant or stakeholders 
can petition the federal Environmental Appeals Board (EAB) for 
review. The EAB can uphold EPA's permit decision or remand it 
back to EPA to correct any identified legal deficiencies.

    III. SECTION-BY-SECTION ANALYSIS AND CONCERNS RAISED BY THE BILL

A. Section 2

    Section 2 of the bill requires EPA to create an online 
database of information about preconstruction permitting since 
fiscal year 2008. This database is to include the number of 
preconstruction permits issued each year; the percentage of 
those permits issued within a year of the date of filing a 
completed application; and the average length of time for the 
EAB to issue a final decision on petitions appealing a decision 
to grant or deny a preconstruction permit application. Section 
2 requires EPA to publish this data within 60 days of enactment 
and to update it annually.
    The bill, as amended during the subcommittee markup, 
provides that EPA can rely on information that it already has 
in its possession and does not have to collect any additional 
information from state and local permitting authorities in 
order to meet the requirements of section 2.
    EPA currently maintains an online database--the RACT/BACT/
LAER clearinghouse--to share information about air pollution 
control technologies used in permitting decisions.\14\ State 
and local permitting agencies report permit information to EPA 
on a voluntary basis. EPA estimates that the database reflects 
only about half of the permits issued.
---------------------------------------------------------------------------
    \14\U.S. Environmental Protection Agency, RACT/BACT/LAER 
Clearinghouse (RBLC) (online at http://cfpub.epa.gov/rblc/).
---------------------------------------------------------------------------
    If EPA relies on this clearinghouse to calculate statistics 
about permitting times for the new database, the statistics 
would be misleading at best, since they would be based on a 
partial and non-representative sample of permits. In fact, the 
statistics are likely to over-estimate permitting times, since 
state and local permitting authorities may be more likely to 
report unique or particularly challenging permits to the RACT/
BACT/LAER clearinghouse and omit more straightforward permits. 
To obtain a more comprehensive picture of permitting times, EPA 
would have to collect information from state and local 
permitting agencies, which would strain the resources of the 
same officials tasked with processing the preconstruction 
permits.
    As a result, it is unclear whether the bill's new 
permitting database serves any useful purpose.

B. Section 3

    Subsection 3(a) effectively requires EPA to issue 
regulations and guidance for implementing a new or revised 
NAAQS ``concurrently'' with issuing the new or revised air 
quality standard. If EPA fails to do so, subsection 3(b) defers 
application of the new air quality standard to a new 
preconstruction permit ``until the Agency has published such 
final regulations and guidance.'' During the Subcommittee 
hearing on the bill, Rep. Dingell asked Collin O'Mara, 
Secretary of the Delaware Department of Natural Resources and 
Environmental Control, whether the language in section 3 would 
help his agency process preconstruction permits any faster. 
Secretary O'Mara answered ``no.''\15\
---------------------------------------------------------------------------
    \15\House Committee on Energy and Commerce, Subcommittee on Energy 
and Power, Testimony of Collin O'Mara, Secretary, Delaware Department 
of Natural Resources and Environmental Control, Legislative Hearing on 
H.R. __, the ``Promoting New Manufacturing Act,'' 113th Cong. (May 21, 
2014) (hereinafter ``O'Mara testimony'').
---------------------------------------------------------------------------
            EPA issuance of ``concurrent'' rules and guidance
    Subsection 3(a) of the bill directs EPA to issue 
regulations and guidance concurrently ``as the Administrator 
determines necessary and appropriate to assist states, 
permitting authorities, and permit applicants.'' This 
qualifying language appears to give EPA some discretion to 
determine when such rules and guidance are appropriate. But 
subsection 3(b) of the bill takes away that discretion. 
Subsection 3(b) states that if EPA fails to publish final 
regulations and guidance concurrently with a new air quality 
standard, then new facilities can receive preconstruction 
permits under the old air quality standard rather than the new 
one. As a result, EPA will have no real choice about when and 
if to issue rules and guidance, if the agency aims to ensure 
all permit applicants comply with the new air quality standard.
    As a practical matter, it is not always feasible or 
advisable for EPA to issue concurrent implementation 
regulations and guidance when revising a NAAQS. Most guidance 
develops organically as states and regulated entities begin to 
implement the NAAQS and ask EPA questions. Moreover, in some 
cases, the existing implementation regulations are sufficient 
for the revised NAAQS, and no new guidance is even needed.\16\
---------------------------------------------------------------------------
    \16\See, e.g., the recent revision of the lead NAAQS.
---------------------------------------------------------------------------
    In its technical assistance to the Committee, EPA raised 
these concerns. EPA explained that implementing regulations are 
sometimes but not always necessary, as the general 
implementation rules apply to new NAAQS, even without revision. 
EPA also explained that guidance is most often the result of 
consultation with state and local air agencies and affected 
sources after they begin the process of implementing the NAAQS. 
EPA expressed concern that requiring EPA to issue unnecessary 
or premature rules and guidance could complicate the ability of 
EPA, the states, and regulated parties to meet their legal 
obligations and create greater regulatory uncertainty.
    Moreover, state and local permitting agencies do not need 
concurrent EPA rules and guidance to begin processing 
preconstruction permits under a new air quality standard. At 
the subcommittee hearing, Secretary O'Mara took issue with what 
he called the ``underlying assumption of the legislation,'' 
that ``permitting authorities are incapable of managing the 
pre-construction permitting process'' despite ``decades of 
experience showing otherwise.'' He testified that a ``wealth of 
guidance and tools'' exist that the state can use after EPA 
adopts or revises a NAAQS. He also noted that the state, on 
occasion, has ``found that approaches that we developed during 
transition were more flexible and protective than those 
contained in the guidance issued later by EPA.''\17\
---------------------------------------------------------------------------
    \17\O'Mara testimony.
---------------------------------------------------------------------------
    The California Air Resources Board (CARB) wrote a letter to 
the Committee sharing similar concerns. CARB wrote: ``For 
decades, permitting authorities have successfully implemented 
their programs in response to every new standard U.S. EPA has 
promulgated. In fact, permitting agencies have historically 
been the advisors to U.S. EPA on the guidance it ultimately 
releases.''\18\
---------------------------------------------------------------------------
    \18\Letter from Mary D. Nichols, Chairman, California Air Resources 
Board, to the Honorable Fred Upton and the Honorable Ed Whitfield, 
Committee on Energy and Commerce (June 5, 2014) (hereinafter ``CARB 
letter'').
---------------------------------------------------------------------------
            Impact on air quality
    Section 3 also allows certain facilities to emit more air 
pollution and harm public health.
    If EPA fails issue concurrent rules and guidance as 
required by section 3, an applicant for a preconstruction 
permit need not comply with a new NAAQS until EPA has published 
final regulations and guidance. During the Subcommittee hearing 
on the bill, John Walke, Senior Attorney and Director of the 
Climate and Clean Air Program at the Natural Resources Defense 
Council, referred to this as ``amnesty'' from national air 
quality standards.\19\
---------------------------------------------------------------------------
    \19\House Committee on Energy and Commerce, Subcommittee on Energy 
and Power, Testimony of John Walke, Natural Resources Defense Council, 
Legislative Hearing on H.R. __, the ``Promoting New Manufacturing 
Act,'' 113th Cong. (May 21, 2014) (hereinafter ``Walke testimony'').
---------------------------------------------------------------------------
    The Subcommittee on Energy and Power amended the bill to 
add a statement that section 3 does not eliminate the 
obligation of a preconstruction permit applicant to install 
best available control technology and lowest achievable 
emissions rate technology, as applicable. However, this new 
language, contained in section 3(c)(2), does not change the 
legal effect of the bill or have any impact on the amnesty it 
provides. A facility still could obtain a preconstruction 
permit based on an old air quality standard.
    When a company applies for a preconstruction permit to 
build a new facility or modify an existing one, there are two 
steps. In step one, the company must determine which pollution 
controls it will install to reduce the facility's emissions. 
The bill does not appear to affect this obligation to identify 
effective pollution controls, and section 3(c)(2) reiterates 
that the obligation remains.
    In step two, the applicant must estimate how much pollution 
the new source will emit, after installing pollution controls, 
and show that it will not cause a violation of the air quality 
standard. In other words, the applicant must model air 
pollution in the area and show that adding pollution won't make 
the air unsafe to breathe. If the new facility's emissions will 
cause a violation of the air quality standard, the applicant 
must take additional steps to cut its emissions or obtain 
offsets for the excess pollution.
    The bill interferes with this second step of the process, 
the point at which the facility has to prove that its pollution 
will not harm public health. If EPA does not issue rules and 
guidance at the same time it issues a new air quality standard, 
the old air quality standard applies for purposes of a 
preconstruction permit. This means that when the facility is 
demonstrating whether its emissions will violate the air 
quality standard, it is using the old, insufficiently 
protective standard as a benchmark.
    In practical terms, this will allow some facilities to emit 
extra pollution at levels that could harm public health. EPA or 
a state permitting agency might have to issue a permit for a 
higher-polluting facility that, under current law, would have 
to install additional pollution controls to lower its emissions 
before receiving that permit.
    This would worsen air quality, particularly in communities 
downwind of the facility, and harm public health. Secretary 
O'Mara from the state of Delaware testified that the 
legislation would ``undermine the basic framework of the Clean 
Air Act--to protect public health of all Americans with an 
adequate margin of safety--and will undercut public confidence 
in permitting programs that were designed to protect public 
health, because regulatory agencies will be required to allow 
harmful emissions in exceedance of a new NAAQS.''\20\ CARB 
wrote that the bill bars permitting agencies from applying a 
new air quality standard to preconstruction permits, ``even if 
public health concerns would otherwise warrant doing so.''\21\
---------------------------------------------------------------------------
    \20\O'Mara testimony.
    \21\CARB letter.
---------------------------------------------------------------------------
            Impact on the cost of and responsibility for cutting air 
                    pollution
    Section 3 would shift the burden of air quality 
improvements to existing industrial facilities. For example, in 
an attainment area, if an applicant for a preconstruction 
permit does not have to meet a revised (more protective) NAAQS, 
then that facility is in effect using up more of the local air 
emissions ``budget'' than it should be. This could make it more 
difficult for existing sources in the area to expand their 
facilities without pushing the area closer to or into 
nonattainment. New facilities also may find it harder to locate 
in the area in the future. Secretary O'Mara said it would be 
``highly unfair'' to force new and existing sources to ``make 
up'' for a facility that emits ``more pollution than otherwise 
would be allowed.''\22\
---------------------------------------------------------------------------
    \22\O'Mara testimony.
---------------------------------------------------------------------------
    In an area that is already in nonattainment, a new or 
modified facility that is allowed to emit more pollution 
because it was permitted under an old NAAQS necessarily will 
force other industrial sources in the nonattainment area to 
make deeper air pollution reductions to bring the area into 
attainment with the new NAAQS. John Walke testified that the 
bill's ``amnesty'' provision ``would only make it more 
difficult for state and local officials to deliver clean air to 
their citizens, and more difficult for other local businesses 
to grow while making up for the statutory amnesty granted to 
newly constructed or modified facilities.''\23\
---------------------------------------------------------------------------
    \23\Walke testimony.
---------------------------------------------------------------------------
    The bill also has the perverse effect of increasing the 
cost to industry of achieving air quality standards. The Clean 
Air Act recognizes that it is generally far less costly and 
more efficient to install pollution controls when a facility is 
being designed or significantly modified, rather than 
retrofitting existing facilities with additional pollution 
controls. Thus, many provisions of the Act require more 
stringent pollution controls for new and modified sources, 
compared with existing sources. This bill, however, allows new 
facilities to forego installing the most effective pollution 
controls at the front end, which could end up costing that 
facility and other existing and future facilities more at the 
back end. As Secretary O'Mara testified, a ``very likely result 
of this bill would be to heap additional, costly pollution 
reduction requirements on already stressed existing sources, 
rather than allowing for the efficient installation of 
pollution controls while new sources are being constructed, 
which is the most cost-effective way to reduce pollution into 
the future.''\24\
---------------------------------------------------------------------------
    \24\O'Mara testimony.
---------------------------------------------------------------------------
            Impact on regulatory certainty, litigation risks, and 
                    permitting timing
    The language in section 3 creates regulatory uncertainty, 
increases the risk of litigation, and could slow permitting 
rather than expedite it.
    Subsection 3(a) of the bill directs EPA to issue 
regulations and guidance ``concurrently'' with any new or 
updated NAAQS. As noted above, however, it is not always 
feasible or advisable for EPA to issue concurrent 
implementation regulations or guidance when revising a NAAQS. 
This creates a catch-22 for EPA. On the one hand, EPA could 
hurry to issue implementation guidance before hearing questions 
from states and industry. That guidance will necessarily be 
incomplete, as it will not address issues that only emerge 
during the implementation process. An industry group that 
wanted to delay implementation of the new air quality standard 
could file a lawsuit saying that EPA's guidance was not 
sufficient.
    On the other hand, EPA could wait to issue more robust and 
helpful guidance, but in the meantime, facilities would be able 
to obtain preconstruction permits under the old air quality 
standard. Downwind communities and nearby businesses might 
challenge a permit that allows a new facility to pollute more 
and shifts the burden of pollution reduction on to them.
    Overall, section 3 leaves open to interpretation--and 
litigation--which rules and guidance EPA must release 
``concurrently'' to prevent a delay in applying the new or 
revised NAAQS, what constitutes ``final'' regulation and 
guidance, and which rules and guidance EPA can wait to release 
at a later time. This uncertainty creates new opportunities for 
more lawsuits and delay.
    CARB argues that this bill could actually slow the 
permitting process by forcing states to wait for EPA guidance, 
even if the state does not think that guidance is necessary to 
issue permits. CARB wrote:

          States such as California, with several regions 
        having severe air quality issues, need the flexibility 
        to develop and implement programs that are protective 
        of public health and welfare while accounting for local 
        air quality, population exposure, the economy, and 
        other factors. Waiting for U.S. EPA to develop guidance 
        will result in unnecessary delays and public health 
        risks because permitting agencies appear to be barred 
        from issuing permits consistent with new, more health-
        protective air quality standards until U.S. EPA 
        provides guidance.\25\
---------------------------------------------------------------------------
    \25\CARB letter.
---------------------------------------------------------------------------
            Amendments Defeated During Markup
    At the full Committee markup, Democratic members offered 
two amendments that aimed to fully or partially address the 
concerns raised by section 3. Rep. Waxman offered an amendment 
to strike subsection 3(b), which allows a facility to obtain a 
preconstruction permit under an old air quality standard if EPA 
does not meet certain procedural requirements. The Waxman 
amendment was defeated by a roll call vote of 18-27. Rep. 
McNerney offered an amendment to give a federal, state, or 
local permitting authority the choice to opt out of 
implementing subsection 3(b), if that permitting authority 
determines that the 3(b) loophole would increase air pollution, 
slow the permitting process, increase regulatory uncertainty, 
create new litigation, shift the burden of pollution control to 
existing facilities, or increase the overall cost of achieving 
air quality standards. The McNerney amendment was defeated by a 
roll call vote of 19-27.

C. Section 4

    Section 4 requires EPA to submit an annual report to 
Congress about the agency's efforts to expedite the process for 
issuance of preconstruction permits. EPA also must identify any 
reasons for delays in issuing preconstruction permits and 
describe what EPA is doing to resolve those delays. The bill 
requires EPA to collect and respond to public comment on each 
report to Congress.
    Because EPA is not the permitting authority for the vast 
majority of preconstruction permits, it is unclear how EPA 
would be able to explain or commit to resolve any permitting 
delays, as required in the annual report to Congress mandated 
by section 4, except in the small minority of cases for which 
EPA is the permitting authority. Completing these annual 
reports could require EPA to involve itself more deeply in 
state and local permitting decisions. These requirements would 
also slow the permit process by diverting limited EPA resources 
from processing permits, issuing guidance, and providing 
support to state and local permit authorities.
    Section 5 specifies that EPA is not required to collect any 
additional information from state and local permitting 
authorities to complete this report, but it is unclear how EPA 
could complete the report without doing so.
    For the reasons stated above, we dissent from the views 
contained in the Committee's report.
                                           Henry A. Waxman,
                                                    Ranking Member.
                                     Bobby L. Rush,
                                            Ranking Member,
                                  Subcommittee on Energy and Power.