Order Code IB10137
CRS Issue Brief for Congress
Received through the CRS Web
Clean Air Act Issues in the 109th Congress
Updated February 22, 2005
James E. McCarthy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Clear Skies / Multi-Pollutant Legislation
Mercury from Power Plants
New Source Review (NSR)
MTBE and Ethanol
Conformity of Transportation Plans and SIPs

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Clean Air Act Issues in the 109th Congress
SUMMARY
Major amendments to the Clean Air Act
108th and 109th Congresses: all of these have
are among the first items on the agenda of the
more stringent deadlines than Clear Skies and
109th Congress, with S. 131 (the Clear Skies
many set a cap on emissions of carbon dioxide
Act) now scheduled for markup March 2. A
in addition to the other three pollutants.
deadline for mercury regulation is helping
Whether to include CO is another key issue in
2
drive the debate. EPA faces a judicial dead-
the Clear Skies debate.
line of March 15, 2005, to promulgate stan-
dards for mercury emissions from electric
Like Clear Skies, other air issues that
power plants. The agency has also proposed
Congress faces are holdovers from the 108th
what it calls the Clean Air Interstate Rule,
Congress. The biggest of these issues involves
which would cap emissions of sulfur dioxide
the regulation of motor fuels, particularly the
and nitrogen oxides from power plants in 29
additives used in reformulated gasoline. One
eastern states, and expects to promulgate a
particular additive, MTBE, has contaminated
final version of this rule at the same time.
groundwater in numerous states, leading 19
states (notably California and New York) to
Rather than promulgate these rules, the
ban or limit its use. In the last three years,
Administration would prefer that Congress
both the House and the Senate have passed
pass the Clear Skies Act, which would replace
bills to ban MTBE nationwide (most recently
the mercury requirement and half a dozen
in comprehensive energy legislation), but final
other Clean Air Act regulatory programs with
passage of these provisions has proven elu-
a market-based approach to controlling power
sive. Remaining issues include whether to
plant pollution. Under Clear Skies, there
grant MTBE producers a safe harbor from
would be national caps on emissions of three
product liability lawsuits; how much stimulus
pollutants (mercury, sulfur dioxide, and nitro-
to provide for the potential MTBE replace-
gen oxides); utilities would receive allow-
ment, ethanol; and whether to address the
ances based on a formula provided in the bill;
proliferation of what are called boutique fuels
and a trading regime would permit compliance
— fuel requirements unique to individual
through installation of pollution controls or
states or metropolitan areas.
the purchase and use of excess allowances. As
in the successful program for acid rain, units
A third set of issues that may see early
that control pollution more or sooner than
action is whether to modify the requirement
required would have excess allowances to sell
that state and local transportation planners
to others or to bank for future use. The costs
demonstrate conformity between their trans-
and benefits of various levels of control, the
portation plans and the timely achievement of
availability of control technology, whether to
air quality standards. Failure to do so can lead
replace existing Clean Air Act programs, and
to a temporary suspension of federal highway
legal issues related to the mercury standard are
funds.
among the issues Congress and EPA face.
This issue brief will be updated on a
Besides Clear Skies, several other bills
regular basis.
have been introduced on these issues in the
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
The Senate Environment and Public Works Committee held hearings on the Clear Skies
Act January 26 and February 2, 2005, and has now scheduled markup of the bill for March
2. An earlier markup, scheduled for February 16, was postponed so that Senators could
undertake discussions aimed at crafting a bill that might be supported by a majority of the
committee’s members.
On December 17, 2004, EPA designated 224 counties in 20 states and the District of
Columbia as “nonattainment areas” for a new fine particle (PM ) air quality standard. On
2.5
April 15, 2004, the agency had designated 474 counties in 32 states and D.C. as
nonattainment areas for a new 8-hour ozone standard. Amendments that would modify some
of the implementation procedures for these areas are expected to be attached to both Clear
Skies and an energy bill, on which House hearings and possible markup are scheduled for
early in the session.
BACKGROUND AND ANALYSIS
Despite steady improvements in air quality in many of the United States’ most polluted
cities, the goal of clean air continues to elude the nation. The most widespread problems
involve ozone and fine particles. As of December 2004, 159 million people lived in areas
classified “nonattainment” for the ozone National Ambient Air Quality Standard; 95 million
lived in areas that were nonattainment for fine particles (PM ).
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Air quality has improved substantially since the passage of the Clean Air Act in 1970:
annual emissions of the six most widespread (“criteria”) air pollutants have declined almost
154 million tons (51%), despite major increases in population, motor vehicle miles traveled,
and economic activity. Meanwhile, however, scientific understanding of the health effects
of air pollution has caused EPA to tighten standards for ozone and fine particles. The agency
attributes 15,000 premature deaths and millions of lost work days annually to exceedance of
the PM standard alone. Recent research has begun to tie ozone pollution to premature
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mortality as well. Thus, there is continuing pressure to tighten air quality standards, and
attention has focused on major sources of pollution, such as coal-fired power plants and
mobile sources.
With this background in mind, the remainder of this issue brief provides an overview
of five prominent air issues that may be of interest in the 109th Congress: multi-pollutant (or
Clear Skies) legislation for electric power plants; mercury from power plants; the gasoline
additives MTBE and ethanol; EPA’s regulatory program for large stationary sources of
pollution, known as New Source Review; and the “conformity” of transportation and clean
air planning. The issue brief provides an overview: most of these issues are addressed at
greater length in separate CRS reports, which contain more information and detailed sources.
These other CRS reports are referenced in the appropriate sections.
Clear Skies / Multi-Pollutant Legislation. The Senate Environment and Public
Works Committee held two hearings on the Clear Skies Act (S. 131) January 26 and
February 2, 2005, and has scheduled markup of the bill for March 2. The bill would
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significantly amend the Clean Air Act to establish a cap-and-trade system for emissions from
electric power plants and other sources of air pollution.
Coal-fired power plants are among the largest sources of air pollution in the United
States. Under the current version of the Clean Air Act, they are not necessarily subject to
stringent requirements. Emissions and the required control equipment can vary depending
on the location of the plant, when it was constructed, whether it has undergone major
modifications, the specific type of coal it burns, and, to some extent, the vagaries of EPA
enforcement policies. There are more than half a dozen separate Clean Air Act programs that
could potentially be used to control emissions, which makes compliance strategy complicated
for utilities and difficult for regulators. And, since the cost of the most stringent available
controls, for the entire industry, could range into the tens of billions of dollars, utilities have
fought hard and rather successfully to limit or delay regulation.
As a result, emissions from power plants have not been reduced as much as those from
some other sources. Many plants built in the 1950s or 1960s (generally referred to as
“grandfathered” plants) have little emission control equipment. Collectively, these plants are
large sources of pollution. In 2003, power plants accounted for nearly 11 million tons of
sulfur dioxide (SO ) emissions (69% of the U.S. total), about 45 tons of mercury emissions
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(at least one-third of the U.S. total), and nearly 4.5 million tons of nitrogen oxides (21.5%
of the U.S. total). Power plants are also considered major sources of fine particles (PM )
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and account for nearly 40% of U.S. anthropogenic emissions of the greenhouse gas carbon
dioxide.
An example of their importance was seen in the August 2003 Northeast blackout. With
about 100 power plants (most of them coal-fired) shut down, researchers found that ambient
levels of SO and ozone were 90% and 50% lower, respectively, in blacked-out areas.
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With new ambient air quality standards for ozone and fine particles taking effect,
emissions of NOx (which contributes to the formation of ozone) and SO (which is among
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the sources of fine particles) need to be reduced. Mercury emissions have also been a focus
of concern: 45 states have issued fish consumption advisories for mercury, covering 13
million acres of lakes, 767,000 river miles, and the coastal waters of 12 entire states. The
continuing controversy over the interpretation of New Source Review requirements for
existing power plants (described in a separate section below) is also exerting pressure for a
more predictable regulatory structure.
Thus, many in industry, environmental groups, Congress, and the Administration agree
that the time is ripe for legislation that addresses power plant pollution in a comprehensive
(multi-pollutant) fashion. Such legislation (dubbed “Clear Skies” by the Administration)
would address the major pollutants on a coordinated schedule, and would rely, to a large
extent, on a system like that used in the acid rain program, where national or regional caps
on emissions are implemented through a system of tradeable allowances. The key questions
have been how stringent the caps should be, and whether carbon dioxide (CO ) will be
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among the emissions subject to a cap.
Regarding the stringency issue, Clear Skies and other bills introduced over the last two
years would require reduction of NOx emissions to 1.5 or 1.7 million tons per year (a 70%-
80% reduction from 1998 levels) and reduction of sulfur dioxide emissions to 2.23-3.0
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million tons per year (also a reduction of 70%-80% versus 1998). Regarding mercury, the
bills would either require EPA to determine the level of reductions, or require reductions of
70%-90% from current levels of emissions (from 48 to 5, 10, or 15 tons annually, depending
on the bill).
In the most stringent of the bills (Senator Jeffords’s S. 150), these reductions would take
place by 2009 or 2010 (depending on the pollutant). The Jeffords bill would also set caps
on CO emissions, at a level 21% below the amount emitted in 2000. (For additional
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information and a detailed comparison of the legislative proposals, see CRS Report
RL32755, Air Quality: Multi-Pollutant Legislation in the 109th Congress, and CRS Report
RL31881, Mercury Emissions to the Air: Regulatory and Legislative Proposals.)
The Clear Skies bill (S. 131) envisions less stringent standards than those in most other
bills, phased in over a much longer period of time. For NOx, the bill would reduce emissions
to 1.79 million tons per year, but not until 2018; an intermediate limit of 2.19 million tons
would be imposed in 2008. For sulfur dioxide, the limit would be 3.0 million tons annually,
also in 2018, with an intermediate limit of 4.5 million tons in 2010. For mercury, the limit
would be 34 tons per year in 2010, declining to 15 tons in 2018.
Because the deadlines are far in the future, the Administration’s analysis shows that
utilities would be likely to “overcomply” in the early years of the program. The
Administration uses this as a selling point for its approach, arguing that it will achieve
reductions sooner than would a traditional regulatory approach with the same deadlines. To
reverse the common saying, every silver lining has its cloud, however. Overcompliance in
the early years would lead to “banked” emission allowances; these could be used in later
years to delay achievement of required reductions. In its analysis of the bill, EPA does not
expect to see the full 70% emission reductions until 2026 or later, a point seized upon by its
opponents to support a more aggressive approach.
In return for establishing its new cap and trade program, Clear Skies would also
eliminate or restrict numerous existing Clean Air Act requirements with respect to electric
generating units, including New Source Review, New Source Performance Standards,
Prevention of Significant Deterioration, Lowest Achievable Emission Rate standards, Best
Available Retrofit Technology, and regulations under development to control mercury
emissions from electric utilities. It would allow sources in other industries to opt into the cap
and trade program, and escape existing Clean Air Act controls. It would remove deadlines
for local areas to achieve ozone and particulate standards under certain conditions. The other
bills generally would leave these existing controls in place.
Clear Skies includes no cap on CO emissions. It is a three-pollutant (SO , NOx,
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mercury) bill, whereas most competing bills have addressed four pollutants (the three plus
CO ). The Administration views controls on CO as a step toward implementing the Kyoto
2
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Protocol to the United Nations Framework Convention on Climate Change, which it opposes
for a variety of reasons, principally the potential economic impacts on U.S. industries.
The absence of CO from the mix leads to different strategies for achieving compliance,
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preserving more of a market for coal, and lessening the degree to which power producers
might switch to natural gas or renewable fuels as a compliance strategy. In its opposition to
CO controls, the Administration is supported by most in the utility and coal industries.
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Others, mostly outside these industries but including some utilities, view CO controls as
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inevitable, if not desirable, and support simultaneous implementation of cap and trade
programs for CO and the other pollutants.
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Although stalled for the past three years, Clear Skies is set for early consideration in the
Senate Environment and Public Works Committee. How quickly (or whether) the bill moves
toward passage may be viewed as an early test of the Administration’s clout in the new
Congress.
Mercury from Power Plants. In addition to sending the Clear Skies bill to
Congress, EPA has proposed regulations addressing mercury, SO , and NOx under its
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existing legislative authority. (These proposals appeared in the Federal Register January 30,
2004.) The agency was required by the terms of a 1998 consent agreement to propose
Maximum Achievable Control Technology (MACT) standards under Section 112 of the
Clean Air Act for emissions of hazardous air pollutants (principally mercury and nickel)
from electric power plants by December 15, 2003. The agency’s proposal offered two
alternatives, one of which would be chosen after review of public comment and further
analysis, and promulgated by March 15, 2005. The first alternative met the agency’s
requirement under the consent agreement by proposing MACT standards. The standards
would apply on a facility-by-facility basis, and would result in emissions of 34 tons of
mercury annually, a reduction of about 30% from the 1999 level. They would take effect in
2008, three years after promulgation, with possible one-year extensions.
The second mercury alternative would use Section 111(d) of the act, a section of the act
rarely used before — and never for hazardous air pollutants. Under this proposal, there
would be a national “cap and trade” system for power plant emissions of mercury. As in
Clear Skies, the cap would be 15 tons of emissions nationwide in 2018 (about a 70%
reduction from 1999 levels). There would also be an intermediate cap in 2010. EPA did not
specify this cap, except to say that it would be the level of reductions achieved under its
Interstate Air Quality (or Clean Air Interstate) Rule, as explained below. The caps would be
implemented through an allowance system similar to that used in the acid rain program,
through which utilities could either control the pollutant directly or purchase excess
allowances from other plants that have controlled more stringently than was required. As
with Clear Skies, early reductions could be banked for later use, which the agency says
would result in reductions being achieved sooner than required. If this happens, however,
it would also mean that the full 70% reduction would be delayed well beyond 2018, as
utilities used up their banked allowances rather than installing further controls.
One of the main criticisms of the cap and trade proposal is that it would not address “hot
spots,” areas where mercury emissions and/or concentrations in water bodies are greater than
elsewhere. It would allow a facility to purchase allowances and avoid any emission controls,
if that compliance approach makes the most sense to the plant’s owners and operators. If
plants near hot spots do so, the cap and trade system may not have an impact on mercury
concentrations in the most contaminated areas. By contrast, a MACT standard requires
reductions at all plants, and would therefore be expected to improve conditions at hot spots.
The Section 111 mercury proposal mirrors the approach of Clear Skies, as does EPA’s
simultaneous proposal to regulate emissions of SO and NOx from power plants in 29 eastern
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states and the District of Columbia. This proposal (the Interstate Air Quality Rule, IAQR,
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or Clean Air Interstate Rule, CAIR) is designed to reduce interstate transport of fine
particulates (PM ) and ozone in order to facilitate attainment of EPA’s new PM and ozone
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standards. Like the mercury proposal, the IAQR would establish a cap and trade program,
with caps in 2010 and 2015.
Many argue that the mercury regulations should be more stringent or implemented more
quickly. To a large extent, these arguments and EPA’s counterarguments rest on assumptions
concerning the availability of control technologies. Controlling SO , NOx, and mercury
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simultaneously, as the agency prefers, would allow utilities to maximize “co-benefits” of
emission controls. Controls such as scrubbers and fabric filters, both of which are widely
used today to control SO and particulates, have the side effect (or co-benefit) of reducing
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mercury emissions to some extent. EPA has attempted to calibrate the required SO and
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mercury standards to substantially reduce the costs of compliance. In fact, under EPA’s
preferred (cap and trade) mercury proposal, the 2010 mercury emission standard would be
set at the level of these co-benefits. Thus, no controls would be required to specifically
address mercury emissions until 2018, and the costs specific to controlling mercury before
then would be zero. The agency’s MACT alternative, which would take effect in early 2008,
makes the same technology assumptions. It sets a limit of 34 tons of mercury emissions, a
reduction of only 29% compared to 1999 levels (and probably less if compared to current
emissions).
Besides citing the cost advantage of relying on co-benefits, EPA claims that technology
specifically designed to control mercury emissions (such as activated carbon injection, ACI)
would not be generally available until after 2010, but this assertion is disputed. ACI and
fabric filters have been in use on municipal waste and medical waste incinerators for nearly
a decade, and have been successfully demonstrated in at least 16 full-scale tests at coal-fired
power plants, for periods as long as a year. Manufacturers of pollution controls and many
others maintain that, if the agency required the use of ACI and fabric filters at power plants,
reductions in mercury emissions as great as 90% could be achieved at reasonable cost in the
near future.
The agency can take cost into consideration under the MACT rules, and cost to electric
utilities appears to have been a determining factor in EPA’s analysis. But calculations of
overall societal costs seem to support the imposition of a more stringent standard. The
agency projects MACT compliance costs at $945 million per year, versus quantifiable annual
benefits (from longer lives and less illness) of more than $15 billion (a 16 to 1 advantage).
The CAIR rule would achieve greater reductions of mercury and have a benefit-cost ratio of
21 to 1. If minimizing costs to society is the criterion, a more stringent standard would better
achieve that end.
In addition to the arguments over technology availability and cost, it is unclear whether
EPA has legislative authority to establish a cap and trade program for mercury: many argue
that the agency is required by the statute to impose MACT standards on each individual plant
once it has decided to control mercury emissions. Questions have also arisen regarding the
role of industry lobbyists in crafting portions of the EPA proposal. For many of these
reasons, 45 Senators wrote EPA Administrator Leavitt at the beginning of April 2004 to
request that he withdraw the mercury proposal and begin over. In June, 178 House members
wrote Leavitt that they hoped further review “will lead to a stronger final rule.” On February
3, 2005, the EPA Inspector General echoed these comments, concluding that EPA senior
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management instructed the staff to develop a standard that would result in emissions of 34
tons annually, instead of basing the standard on unbiased analysis. If the final rule is
promulgated in a form similar to the agency’s proposal, it appears likely it will be subject to
court challenge. (For additional information on the mercury and IAQR/CAIR proposals, see
CRS Report RL31881, Mercury Emissions to the Air: Regulatory and Legislative Proposals;
CRS Report RL32744, Mercury Emissions from Electric Generating Units: A Review of EPA
Analysis and MACT Determination; and CRS Report RL32273, Air Quality: EPA’s
Proposed Interstate Air Quality Rule.)
New Source Review (NSR). A related issue that has driven some of the debate over
the regulation of power plant emissions is whether EPA has adequately enforced existing
regulations, using a process called New Source Review. EPA took a more aggressive stance
on New Source Review under the Clinton Administration, filing lawsuits against 13 utilities
for violations at 51 plants in 13 states. The Bush Administration has made little headway in
settling the suits or bringing the cases to trial, and has proposed major changes that critics
argue will gut New Source Review as it pertains to modifications of existing plants. EPA
promulgated changes to these rules on December 31, 2002, and October 27, 2003, the net
effect of which will be to allow modification of numerous existing major sources of air
pollution without subjecting them to current emission standards.
The controversy over the NSR process stems from EPA’s application of New Source
Performance Standards to existing stationary sources of air pollution that have been
modified. The Clean Air Act states that new sources (subject to NSR) include modifications
of existing sources as well as plants that are totally new. Industry has generally avoided the
NSR process, however, by claiming that changes to existing sources were “routine
maintenance” rather than modifications. In the 1990s, EPA began reviewing records of
electric utilities, petroleum refineries, and other industries to determine whether the changes
were routine. As a result of these reviews, since late 1999, EPA and the Department of
Justice have filed suit against or settled with 17 electric utilities that EPA claims made major
modifications to 64 plants in 16 states, extending their lives and increasing their electric
generating capacity without undergoing required New Source Reviews and without installing
best available pollution controls. With four exceptions, these suits were filed during the
Clinton Administration.
Six of the 17 utilities charged with NSR violations (Tampa Electric, PSEG of New
Jersey, Dominion Resources/Virginia Electric Power, Wisconsin Electric Power, Southern
Indiana Gas and Electric, and South Carolina Public Service Authority/Santee Cooper) have
settled with EPA, agreeing to spend more than $3.5 billion over the next decade on pollution
controls or fuel switching in order to reduce emissions at their affected units. One other
utility (Cinergy) reached agreement in principle four years ago to spend more than $1 billion
to resolve NSR violations, but final settlement negotiations have not been concluded. The
company recently announced that it would voluntarily spend between $1.65 billion and $2.15
billion over the next decade to reduce emissions of SO , NOx, and mercury. An eighth
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utility, the Tennessee Valley Authority, has announced plans to spend $1.5 billion to reduce
emissions at four of its plants, although not as part of a settlement agreement. Since July 25,
2000, the agency also reached 12 agreements with petroleum refiners representing more than
40% of industry capacity. The refiners agreed to settle potential charges of NSR violations
by paying fines and installing equipment to eliminate 200,000 tons of pollution.
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Most of the utilities have not settled with EPA. They and other critics of the agency’s
enforcement actions claim that EPA reinvented the rules. They contend that a strict
interpretation of what constitutes routine maintenance will prevent them from making
changes that were previously allowed, without a commitment of time and money for permit
reviews and the installation of expensive pollution control equipment. This provides
disincentives for power producers, refiners, and others to expand output at existing facilities,
they maintain.
The first case involving one of the non-settling utilities went to trial in February 2003.
In an August 7, 2003, decision, U.S. District Judge Edmund Sargus found that Ohio Edison
had violated the Clean Air Act 11 times in modifying its W. H. Sammis power plant.
Penalties are to be determined in a separate trial that has been delayed, pending settlement
negotiations.
EPA has promulgated five sets of changes to NSR. The most controversial are new
regulations defining what constitutes routine maintenance, which is exempt from review.
These changes appeared in the Federal Register on October 27, 2003. The new regulations
would exempt industrial facilities from undergoing NSR (and thus from installing new
emission controls) if they are replacing safety, reliability, and efficiency rated components
with new, functionally equivalent equipment, and if the cost of the replacement components
is less than 20% of the replacement value of the process unit. Using this benchmark, few,
if any, plant modifications would trigger new pollution controls.
These changes are highly controversial. The Administration and its supporters have
characterized them as streamlining or improving the program; others see them as
permanently “grandfathering” older, more polluting facilities from ever having to meet the
clean air standards required of newer plants. On the day the first set of changes were
promulgated (December 31, 2002), nine northeastern states filed suit to overturn them. In
addition, 14 states and numerous municipalities have filed suit to block the “routine
maintenance” portion of the rule. This portion of the rule was stayed by the U.S. Court of
Appeals for the D.C. Circuit on December 24, 2003.
Implementation of the changes also raises questions about EPA’s ongoing NSR
enforcement actions. While the agency stated in the new rule that “we do not intend our
actions today to create retroactive applicability for today’s rule,” continued pursuit of the
enforcement actions filed during the Clinton Administration would create a double standard
for utilities, with one set of rules applicable to those utilities unlucky enough to have been
cited for violations prior to promulgation of the new rule, and a different standard applicable
afterward. Despite earlier agency denials that the rule would affect ongoing investigations,
in early November 2003, EPA’s enforcement chief, J. P. Suarez, and another EPA official
were reported to have indicated that the agency would drop enforcement actions against 47
facilities that had already received notices of violation, and would drop investigations of
possible violations at an additional 70 power companies. Agency staff who were involved
in the enforcement actions argue that the prospect of an NSR rollback caused utilities already
charged with violations to withdraw from settlement negotiations over the pending lawsuits,
delaying emission reductions that could have been achieved in the near future. (For
additional information, see CRS Report RS21608, Clean Air and New Source Review:
Defining Routine Maintenance, and CRS Report RL31757, Clean Air: New Source Review
Policies and Proposals.)
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At Congress’s direction, the National Academy of Sciences began a review of the NSR
program in May 2004, with an expected completion date of December 2005. An interim
report, released in January 2005, said the committee had not reached final conclusions, but
it also said: “In general, NSR provides more stringent emission limits for new and modified
major sources than EPA provides in other existing programs”; and “It is ... unlikely that Clear
Skies would result in emission limits at individual sources that are tighter than those
achieved when NSR is triggered at the same sources.”
Besides the NAS study, on April 21, 2003, the National Academy of Public
Administration released a report commissioned by Congress that made sweeping
recommendations to modify NSR. The study panel recommended that Congress end the
“grandfathering” of major air emission sources, by requiring all major sources that have not
obtained an NSR permit since 1977 to install Best Available Control Technology or Lowest
Achievable Emissions Rate control equipment. In the interim, the NAPA panel concluded,
EPA and the Department of Justice should continue to enforce NSR vigorously, especially
for changes at existing facilities.
MTBE and Ethanol. Another set of issues that awaits the 109th Congress, regulation
of the gasoline additives MTBE and ethanol, has also been considered by several previous
Congresses. In a Discussion Draft released by the House Energy and Commerce Committee
in early February 2005, the issues hold a prominent place, mirroring the provisions of the
108th Congress’s H.R. 6. H.R. 6 was a comprehensive energy bill that passed the House and
Senate and emerged from conference in 2003, before failing in the Senate on a cloture vote.
MTBE is used to meet Clean Air Act requirements that reformulated gasoline (RFG),
sold in the nation’s worst ozone nonattainment areas, contain at least 2% oxygen, to improve
combustion. Under the RFG program, areas with “severe” or “extreme” ozone pollution
(124 counties with a combined population of 73.6 million) must use reformulated gas; areas
with less severe ozone pollution may opt into the program as well, and many have. In all,
portions of 17 states and the District of Columbia use RFG, and about 30% of the gasoline
sold in the United States is RFG.
The law requires that RFG contain at least 2% oxygen by weight. Refiners can meet
this requirement by adding a number of ethers or alcohols, any of which contains oxygen and
other elements. By far the most commonly used oxygenate has been MTBE. In 1999, 87%
of RFG contained MTBE, a number reduced to 46% by 2004. MTBE has also been used
since the late 1970s in non-reformulated gasoline, as an octane enhancer, at lower
concentrations. As a result, gasoline with MTBE has been used virtually everywhere in the
United States, whether or not an area has been subject to RFG requirements.
MTBE leaks, generally from underground gasoline storage tanks, have been implicated
in numerous incidents of ground water contamination. The substance creates taste and odor
problems in water at very low concentrations, and some animal studies indicate it may pose
a potential cancer risk to humans. For these reasons, 19 states have taken steps to ban or
regulate its use. The most significant of the bans (in California, New York, and Connecticut)
took effect at the end of 2003, leading many to suggest that Congress revisit the issue to
modify the oxygenate requirement and set more uniform national requirements regarding
MTBE and its potential replacements (principally ethanol).
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Support for eliminating the oxygen requirement on a nationwide basis is widespread
among environmental groups, the petroleum industry, and states. In general, these groups
have concluded that gasoline can meet the same low emission performance standards as RFG
without the use of oxygenates. But potential opposition to enacting legislation removing the
oxygen requirement arises from a number of agricultural interests. Nearly 13% of the
nation’s corn crop is used to produce the competing oxygenate, ethanol. If MTBE use is
reduced or phased out, but the oxygen requirement remains in effect, ethanol use will soar,
increasing demand for corn. Ethanol use has already grown substantially as MTBE begins
to be phased out. Conversely, if the oxygen requirement is waived by EPA or legislation, not
only will MTBE use decline, but likely, so would demand for ethanol. Thus, Members of
Congress and Senators from corn states have taken a keen interest in MTBE legislation.
H.R. 6 in the 108th Congress — and the Energy and Commerce Committee Discussion
Draft in the 109th Congress — contain numerous MTBE and ethanol provisions in Title XV.
Most are expected to be included in a 109th Congress bill with little change. They would ban
the use of MTBE as a fuel additive, except in states that specifically authorize its use, after
December 31, 2014, unless the President determines not to ban it. The Clean Air Act
requirement to use MTBE or other oxygenates in RFG would be repealed, 270 days after
enactment. In place of this requirement, a major stimulus to the use of ethanol would be
provided: under a renewable fuels standard (RFS), annual production of gasoline would be
required to contain at least 5 billion gallons of ethanol or other renewable fuel (an increase
from 3.7 billion gallons in 2004) by 2012. To prevent backsliding on air quality, the
provisions require that the reductions in emissions of toxic substances achieved by RFG be
maintained; they authorize $2 billion in grants to assist merchant MTBE production facilities
in converting to the production of other fuel additives. The provisions also authorize funds
for MTBE cleanup, and perhaps most controversially, would provide a “safe harbor” from
defective product liability lawsuits for producers of MTBE, ethanol, and other renewable
fuels: product liability lawsuits have been used to force petroleum and chemical companies
to pay for cleanup of ground and surface water contaminated by releases of fuels containing
MTBE. The safe harbor provision was cited by numerous opponents of H.R. 6 in Senate
debate on the conference report. (For additional background on the MTBE issue, see CRS
Report 98-290, MTBE in Gasoline: Clean Air and Drinking Water Issues. For information
on ethanol, see CRS Report RL30369, Fuel Ethanol: Background and Public Policy Issues.)
Conformity of Transportation Plans and SIPs. A fifth clean air issue considered
virtually certain to return in the 109th Congress is the conformity of metropolitan area
transportation plans with the Clean Air Act. Under the act, areas that have not attained one
or more of the six National Ambient Air Quality Standards must develop State
Implementation Plans (SIPs) demonstrating how they will reach attainment. At least 124
areas with a combined population in excess of 159 million are subject to the SIP
requirements. Section 176 of the Clean Air Act prohibits federal agencies from funding
projects in these areas unless they “conform” to the SIPs. Specifically, projects must not
“cause or contribute to any new violation of any standard,” “increase the frequency or
severity of any existing violation,” or “delay timely attainment of any standard.” Because
new highways generally lead to an increase in vehicle miles traveled and related emissions,
both the statute and regulations require that an area’s Transportation Improvement Program
(TIP), which identifies major highway and transit projects an area will undertake,
demonstrate conformity each time it is revised (i.e., at least every two years). Highway and
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transit projects in most nonattainment areas cannot receive federal funds unless they are part
of a conforming TIP.
The impact of conformity requirements is expected to grow in the next few years for
several reasons. The growth of emissions from SUVs and other light trucks and greater than
expected increases in vehicle miles traveled have both made it more difficult to demonstrate
conformity; court decisions have tightened the conformity rules; and the implementation of
more stringent air quality standards for both ozone and fine particulates in 2004 means that
additional areas will be subject to conformity beginning this year. Thus, numerous
metropolitan areas could face a temporary suspension of highway and transit funds unless
they impose sufficient reductions in vehicle, industrial, or other emissions. In a 2003 report,
the Government Accountability Office (GAO) found that, over the preceding six years, only
five metropolitan areas had to change transportation plans in order to resolve a conformity
lapse; but about one-third of local transportation planners surveyed expected to have
difficulty demonstrating conformity in the future. (See U.S. GAO, Environmental
Protection: Federal Planning Requirements for Transportation and Air Quality Protection
Could Potentially Be More Efficient and Better Linked, April 2003.)
The Clean Air Act provides no authority for waivers of conformity, and the only grace
period allowed is for one year following an area’s initial designation as nonattainment. Only
a limited set of exempt projects (mostly safety-related or replacement and repair of existing
transit facilities) can be funded in lapsed areas: the rules do not even allow funding of new
projects that might reduce emissions, such as new transit lines. These limitations are among
the issues of concern. In addition, many have raised concerns about a mismatch between the
SIP, TIP, and long-range transportation planning cycles, and have called for less frequent,
but better coordinated, demonstrations of conformity.
In the 108th Congress, conformity provisions were contained in S. 1072, the surface
transportation bill passed by the Senate February 12, 2004, and H.R. 3550, the House version
that passed April 2, 2004. The Senate bill would have required less frequent conformity
demonstrations (at least every four years instead of every two years as in current law), and
would have shortened the planning horizon over which conformity must be demonstrated to
10 years in most cases, instead of the current 20 years. The House version of the bill was
similar, but it would have required that the local air pollution control agency agree if the
planning horizon were to be shortened. The House bill also would have established a 12-
month grace period following a failure to demonstrate conformity before a lapse would be
declared. Conferees did not report a bill, so these issues remain for consideration in the 109th
Congress. (For additional information, see CRS Report RL32106, Transportation
Conformity Under the Clean Air Act: In Need of Reform?)
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