Order Code IB10137
CRS Issue Brief for Congress
Received through the CRS Web
Clean Air Act Issues in the 109th Congress
Updated October 26, 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
MTBE and Ethanol
Ozone Nonattainment Area Deadlines
Conformity of Transportation Plans and SIPs
Hurricanes Katrina and Rita

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Clean Air Act Issues in the 109th Congress
SUMMARY
Congress acted on several Clean Air Act
lished a cap-and-trade program for emissions
(CAA) issues in legislation that it passed and
of sulfur dioxide (SO ), nitrogen oxides
2
sent to the President in late July. The most
(NOx), and mercury from coal-fired electric
significant of these issues, dealing with etha-
power plants was among the first items on the
nol and reformulated gasoline (RFG), were
agenda of the 109th Congress: S. 131 (the
addressed in the Energy Policy Act of 2005,
Clear Skies Act) was scheduled for markup by
H.R. 6 (P.L. 109-58). The act eliminates a
the Senate Environment and Public Works
requirement that RFG, used in the nation’s
Committee March 9. But the committee failed
most polluted areas, contain at least 2% oxy-
to approve the bill, on a 9-9 tie vote, in large
gen. In its place, the act requires that the total
part because of complaints that the bill would
gasoline supply contain increasing amounts of
weaken existing Clean Air Act requirements.
a specific oxygenate, ethanol, which is gener-
Another issue in the debate was whether to
ally made from corn. Under the bill, use of
cap emissions of carbon dioxide (CO ) in
2
ethanol will more than double by 2012.
addition to the other three pollutants. With
Clear Skies stalled, on March10, EPA final-
Congress also amended the Clean Air
ized the Clean Air Interstate Rule (CAIR),
Act in H.R. 3 (P.L. 109-59), the transportation
which will cap emissions of SO and NOx
2
bill that the President signed August 10. H.R.
from power plants in 28 eastern states and the
3 addresses the requirement that state and
District of Columbia and establish a cap-and-
local transportation planners demonstrate
trade system through regulation.
conformity between their transportation plans
and the timely achievement of air quality
A deadline for mercury regulations
standards. Under the act, the frequency of
helped drive the Clear Skies debate: EPA
conformity determinations and the time hori-
faced a judicial deadline of March 15, 2005, to
zon over which conformity must be demon-
promulgate standards for power plant mercury
strated will both be reduced, making the
emissions. The agency met this deadline, but
requirement less burdensome. Failure to
the specific regulations have been widely
demonstrate conformity can lead to a tempo-
criticized and are now being challenged by at
rary suspension of federal highway funds.
least 15 states. The regulations could have
been overturned if Congress disapproved them
On October 7, in response to higher
under the Congressional Review Act. Resolu-
gasoline prices and the impact of hurricanes
tions to do so (S.J.Res.20/H.J.Res. 56) were
on Gulf Coast refineries, the House passed
introduced June 29. The Senate resolution
legislation to facilitate the construction of new
was discharged from the Committee on Envi-
refineries. H.R. 3893, would empower the
ronment and Public Works July 18, but was
Department of Energy to establish expedited
defeated on a vote of 51-47, September 13.
schedules for issuing refinery permits, includ-
Whether to modify other requirements of the
ing those under the Clean Air Act, and would
Clean Air Act (New Source Review, deadlines
modify CAA provisions regarding fuel formu-
for nonattainment areas, and provisions deal-
lations and nonattainment areas.
ing with interstate air pollution) have also
been contentious issues.
Other Clean Air Act amendments appear
to have stalled. A bill that would have estab-
This issue brief will be updated regularly.
Congressional Research Service ˜ The Library of Congress

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10-26-05
MOST RECENT DEVELOPMENTS
On October 7, the House passed H.R. 3893, a bill to facilitate the construction of new
petroleum refineries. The bill would empower the Department of Energy to establish
expedited schedules for issuing refinery permits, including those under the Clean Air Act,
and would modify CAA provisions regarding fuel formulations and nonattainment areas.
On September 13, the Senate rejected S.J.Res. 20, a resolution that would have
disapproved EPA’s cap-and-trade regulations on emissions of mercury from power plants.
The cap-and-trade regulations, promulgated March 29 and May 18, 2005, are also being
challenged in court by 15 states that believe EPA is obligated to impose stronger, plant-
specific Maximum Achievable Control Technology standards. On October 21, EPA agreed
to reconsider seven issues related to the mercury rules.
On July 29, the Senate passed the conference report on H.R. 6, the comprehensive
energy bill. The House passed it the previous day, and the bill was signed by the President
(P.L. 109-58), August 8. Among many other provisions, the new law amends the Clean Air
Act to require that motor fuels contain at least 7.5 billion gallons of ethanol or other
renewable fuels by 2012 (more than double the amount used in 2004). It also amends the
Clean Air Act provisions on reformulated gasoline, removing the requirement that RFG
contain at least 2% oxygen.
The new law also gives the EPA Administrator authority to waive Clean Air Act
controls on fuels or fuel additives if there are extreme and unusual supply conditions that
result from a natural disaster. This new authority was used, starting August 30, to ease
potential fuel distribution problems resulting from Hurricane Katrina.
Both the House and Senate passed the conference version of H.R. 3, the surface
transportation bill, July 29. The President signed it (P.L. 109-59), August 10. Among its
provisions, the bill amends Clean Air Act requirements on the conformity of transportation
and air quality planning.
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 May 2005, 159 million people lived in areas
classified “nonattainment” for the ozone National Ambient Air Quality Standard; 90 million
lived in areas that were nonattainment for fine particles (PM ).
2.5
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 17,000 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
2.5
mortality as well. Thus, there is continuing pressure to tighten air quality standards —
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another tightening for fine particles is apparently on the way, with a final decision expected
in 2006. And attention has focused on major sources of ozone and particulate pollution, such
as coal-fired power plants and mobile sources.
With this background in mind, the bulk of this issue brief provides an overview of five
prominent air issues 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; ozone nonattainment area deadlines; and the “conformity” of
transportation and clean air planning. Following these issues, a short section discusses the
waiver of Clean Air Act regulations in response to Hurricane Katrina. 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 blocked S. 131, the Clear Skies Act, from advancing to the Senate floor,
on a tie vote, March 9. The committee’s 9-9 vote brought an end, possibly for the remainder
of the Congress, to further attempts to find a compromise on Clear Skies amendments.
Earlier markups of Clear Skies, scheduled for February 16, March 2, and March 3, had been
postponed so that Senators could undertake discussions aimed at crafting a compromise. The
bill would have significantly amended the Clean Air Act to establish a cap-and-trade system
for emissions from electric power plants and other sources of air pollution, while eliminating
or deferring numerous existing regulations affecting those sources.
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. More than half a dozen separate Clean Air Act programs 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
2
(more than 40% 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 ) and
2.5
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.
2
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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
2
the sources of fine particles) need to be reduced. Mercury emissions have also been a focus
of concern: 44 states have issued fish consumption advisories for mercury, covering 13
million acres of lakes, 765,000 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 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
2
among the emissions subject to a cap.
Regarding the stringency issue, Clear Skies and other bills introduced over the last two
Congresses would require reduction of NOx emissions to 1.5 or 1.8 million tons per year (a
70%-80% reduction from 1998 levels) and reduction of sulfur dioxide emissions to 2.23-3.0
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. 150 and Representative
Waxman’s H.R. 1451), these reductions would take place by 2009 or 2010 (depending on
the pollutant). The Jeffords and Waxman bills would also set caps on CO emissions. (For
2
additional information and a detailed comparison of the legislative proposals, see CRS
Report RL32755, Air Quality: Multi-Pollutant Legislation in the 109th Congress, by Larry
Parker and John Blodgett.)
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. (In negotiations over S. 131,
Senators Voinovich and Inhofe offered to change the Phase 2 deadlines under Clear Skies
to 2016, and to implement a Phase 3 SO cap of 2.5 million tons in 2018.)
2
Because the deadlines are far in the future, the Administration’s analysis of Clear Skies
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. But
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.
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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 Maximum Achievable Control Technology regulations
for mercury. 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, and make it more difficult
for nonattainment areas to challenge interstate sources of air pollution. The other bills
generally would leave these existing controls in place. (For a more thorough discussion of
how Clear Skies would change the Clean Air Act, see CRS Report RL32782, Clear Skies
and the Clean Air Act: What’s the Difference?, by Larry Parker and James McCarthy.)
Clear Skies includes no cap on CO emissions. It is a three-pollutant (SO , NOx,
2
2
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
2
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,
2
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.
2
Others, mostly outside these industries but including some utilities, view CO controls as
2
inevitable, if not desirable, and support simultaneous implementation of cap-and-trade
programs for CO and the other pollutants.
2
Although stalled for the past three years, Clear Skies was set for early consideration this
year in the Senate Environment and Public Works Committee; but the opposing sides were
not able to reach a consensus and the bill failed on a tie vote on March 9. The House has
taken no action, other than an Energy and Commerce subcommittee hearing, May 26.
In negotiations preceding the Senate committee vote, there was some movement toward
a compromise. On the Republican side, there were offers to move the deadlines for Phase
2 caps forward two years (from 2018 to 2016) and to add a third phase for SO ; a mechanism
2
for addressing mercury hot spots was added; and adjustments to the provisions on interstate
transport of pollution were offered. The opponents of the bill (who included all the
committee Democrats, plus Senators Jeffords and Chafee) conceded that a bill with hard CO2
caps would not pass, and were willing to accept some less stringent provisions on that score.
These compromises proved insufficient to bridge the gap. Whether they might serve as a
basis for further discussions and action later in the Congress remains to be seen.
Immediately following the vote, on March 10, EPA announced that it would promulgate
final regulations for utility emissions of SO and NOx in 28 eastern states and the District
2
of Columbia through its Clean Air Interstate Rule (CAIR). (The rule appeared in the Federal
Register on May 12, 2005.) The cap-and-trade provisions of CAIR mimic those of Clear
Skies, but CAIR does not allow EPA to remove existing Clean Air Act requirements, as
Clear Skies would. Under CAIR, EPA projects that nationwide emissions of SO will
2
decline 53% by 2015, and NOx emissions will decline 48%. The agency also projects that
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the rule will result in $85-$100 billion in health benefits annually by 2015, including the
prevention of 17,000 premature deaths annually. CAIR’s health and environmental benefits
are more than 25 times greater than its costs, according to EPA. (For additional information
on the CAIR rule, see CRS Report RL32927, Clean Air Interstate Rule: Review and
Analysis, by Larry Parker.)
Mercury from Power Plants. On March 15, 2005, EPA also finalized through
regulation a cap-and-trade program for mercury emissions from electric utilities. (These
rules appeared in the Federal Register March 29, 2005 and May 18, 2005.) The mercury
regulations (which, like CAIR, mimic the requirements of Clear Skies) rely almost entirely
on co-benefits of the CAIR rule. The agency’s analysis of the mercury rule finds that less
than 1% of coal-fired power plant capacity would install pollution control equipment
specifically designed to control mercury within 10 years as a result of the mercury rule. By
2020, only 4% of capacity would have such equipment.
EPA reversed course several times before choosing its final approach to mercury
regulation. The agency was required by the terms of the 1990 Clean Air Act Amendments
and a 1998 consent agreement to determine whether regulation of mercury from power plants
under Section 112 of the Clean Air Act was appropriate and necessary. It concluded that it
was so, in a December 2000 regulatory finding. The finding triggered other provisions of the
consent agreement: that the agency propose Maximum Achievable Control Technology
(MACT) standards for electric power plants by December 15, 2003, and finalize them by
March 15, 2005.
The December 2003 proposal offered two alternatives. The first met the agency’s
requirement under the consent agreement by proposing MACT standards. The standards
would have applied on a facility-by-facility basis, and would have resulted in emissions of
34 tons of mercury annually, a reduction of about 30% from the 1999 level. The standards
would have taken effect in 2008, three years after promulgation, with possible one-year
extensions.
The second mercury alternative, a variant of which the agency chose to promulgate
March 15, 2005, uses Section 111(d) of the act. To avoid having to promulgate MACT
standards, the agency proposed reversing its December 2000 regulatory finding, arguing that
while MACT standards were “appropriate,” they were not “necessary,” since the emissions
could be controlled under Section 111(d) instead. Section 111(d) has rarely been used before
— and never for hazardous air pollutants. In the final rule, the agency went a step further,
concluding that MACT regulations are neither appropriate nor necessary, and so revises its
December 2000 regulatory finding.
Instead, the final regulations establish a national cap-and-trade system for power plant
emissions of mercury. As in Clear Skies, the cap will be 15 tons of emissions nationwide
in 2018 (about a 70% reduction from 1999 levels, if achieved). There will also be an
intermediate cap of 38 tons in 2010. The caps will be implemented through an allowance
system similar to that used in the acid rain program, through which utilities can either control
the pollutant directly or purchase excess allowances from other plants that have controlled
more stringently or sooner than required. As with Clear Skies, early reductions could be
banked for later use, which the agency says would result in emissions of 31.3 tons in 2010,
nearly 7 tons less than the cap. If this happens, it would allow utilities to delay compliance
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with the full 70% reduction until well beyond 2018, as they use up banked allowances rather
than installing further controls. The agency’s analysis projects actual emissions to be 24.3
tons (less than a 50% reduction) as late as 2020. Full compliance with the 70% reduction
might be delayed until after 2030.
Besides the stretched out implementation schedule, 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 would have required reductions at
all plants, and would therefore be expected to improve conditions at hot spots.
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
2
mercury 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 of reducing
2
mercury emissions to some extent. Under EPA’s cap-and-trade regulations, both the 2010
and 2018 mercury emission standards are set to maximize use of these co-benefits. Thus,
hardly any controls would be required to specifically address mercury emissions before the
2020s, and the costs specific to controlling mercury would be minimal.
Besides citing the cost advantage of relying on co-benefits, EPA has claimed that
technology specifically designed to control mercury emissions (such as activated carbon
injection, ACI) would not be generally available until after 2010. This assertion is widely
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 or cap-and-trade rules,
and cost to electric utilities appears to have been a determining factor in EPA’s analysis. In
its proposal, however, calculations of the overall societal costs and benefits seemed to
support the imposition of a more stringent standard. The agency projected 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 final rule
completely changes this analysis. It concludes that the benefits of mercury control are at
most $43 million per year, with annual costs as high as $896 million. The new analysis did
not include several peer-reviewed studies that indicated stricter utility mercury rules would
have yielded large benefits.
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
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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, 2004, 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 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. Nevertheless, the
agency weakened the final rule rather than strengthening it. Thus, opponents, including at
least 15 states, have filed suit to overturn the mercury rule.
Congress could also have played a role in reversing the rule, under the provisions of the
Congressional Review Act (5 U.S.C. Sections 801-808). On June 29, 2005, Senator Leahy
and 31 cosponsors introduced S.J.Res. 20; on the same day, a similar resolution (H.J.Res. 56)
was introduced in the House by Representative Meehan. If enacted into law, these
resolutions would have disapproved the rule EPA promulgated on March 29, in which the
agency determined not to regulate mercury from fossil-fueled electric utility units under
Section 112. The net effect of disapproval would have been that EPA would be forced to
issue MACT standards for coal- and oil-fired electric power plants. On September 13,
however, the Senate rejected S.J.Res. 20, 51-47, thus allowing the EPA rule to go forward.
The Senate action has no effect on judicial challenges, which are still pending.
In addition to judicial challenges, most of the same states and several environmental
groups petitioned EPA to reconsider the mercury rules, in part, they said, because portions
of the final rules had not been included in the proposal, and therefore the public had been
denied the opportunity to comment. The agency agreed to a reconsideration, and on October
21, announced that it would reconsider seven specific issues related to the final rules. Formal
publication of an agency notice in the Federal Register will begin a 45-day public comment
period on these issues.
(For additional information on the mercury rule, see CRS Report RL32868, Mercury
Emissions from Electric Power Plants: An Analysis of EPA’s Cap-and-Trade Regulations,
by James McCarthy; and CRS Report RL32744, Mercury Emissions from Electric
Generating Units: A Review of EPA Analysis and MACT Determination, by Dana Shea, et
al. For discussion of the Congressional Review Act and how it applied to the mercury rule,
see CRS Report RS22207, Congressional Review of EPA’s Mercury Rule, by James
McCarthy and Richard Beth.)
MTBE and Ethanol. Congress acted on several Clean Air Act issues in H.R. 6, the
comprehensive energy bill that it passed and sent to the President July 29. The most
significant of these issues dealt with ethanol and reformulated gasoline (RFG). The final
version of the bill stripped most provisions dealing with the related issue of MTBE, a
gasoline additive that competes with ethanol and has been the subject of much controversy.
MTBE and ethanol have been 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
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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.
Implemented in 1995, the law required that RFG contain at least 2% oxygen by weight.
Refiners could 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, 25 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).
Support for eliminating the oxygen requirement on a nationwide basis has been
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 came 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 were reduced or phased out, but the oxygen requirement remained in effect,
ethanol use would soar, increasing demand for corn. Ethanol use has already grown
substantially as MTBE begins to be phased out. Conversely, if the oxygen requirement were
waived by EPA or by legislation, not only would 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 and RFG legislation.
As passed by the House on April 21, H.R. 6 contained numerous MTBE and ethanol
provisions. With some potential exceptions, it would have banned the use of MTBE as a fuel
additive, except in states that specifically authorized its use, after December 31, 2014. The
Clean Air Act requirement to use MTBE or other oxygenates in RFG would have been
repealed — 270 days after enactment in most states, immediately in California. In place of
this requirement, the bill substituted a major stimulus to the use of ethanol: under a
renewable fuels standard (RFS), annual production of gasoline would have been required to
contain at least 5 billion gallons of ethanol or other renewable fuel (an increase from 3.4
billion gallons in 2004) by 2012. To prevent backsliding on air quality, the bill required that
the reductions in emissions of toxic substances achieved by RFG be maintained; it authorized
$2 billion in grants to assist merchant MTBE production facilities in converting to the
production of other fuel additives. The bill also authorized funds for MTBE cleanup, and
perhaps most controversially, would have provided a “safe harbor” from defective product
liability lawsuits for producers of MTBE, ethanol, and other renewable fuels: product
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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 Senate version of H.R. 6, passed June 28, contained MTBE and ethanol provisions
as well, but they were different from the House bill in several respects. The Senate bill
would have increased the renewable fuels standard to 8 billion gallons by 2012. It would
have phased out the use of MTBE sooner (within four years of enactment, rather than at the
end of 2014), and it omitted a potential nationwide presidential exception to the MTBE ban
that the House version would have provided. The Senate version also omitted the safe harbor
for MTBE producers. In the 108th Congress, the safe harbor provision had been among the
most controversial provisions in a similar bill, cited by numerous opponents in Senate debate
on the conference report. (The opponents prevailed on a cloture motion, and the bill died.)
The 109th Congress Senate bill also differed in how much it would authorize for cleanup of
MTBE releases and for transition assistance to MTBE producers.
In the end, unable to reach a compromise addressing MTBE, House and Senate
conferees stripped most of the MTBE provisions from the conference report on H.R. 6. The
final version, approved by the House July 28 and the Senate July 29, and signed into law
(P.L. 109-58) by the President August 8, neither bans MTBE use nor provides a safe harbor
for its producers, nor does it provide transition assistance for MTBE producers. It does,
however, repeal the RFG program’s oxygen requirement and, in place, requires that motor
fuels contain 7.5 billion gallons of ethanol or other renewable fuels by 2012 — more than
double the amount of 2004 consumption. When this requirement is fully implemented, as
much as 30% of the nation’s corn crop could be dedicated to ethanol production. (For
additional discussion of the House and Senate bills, see CRS Report RL32865, Renewable
Fuels and MTBE: A Comparison of Selected Provisions in the Energy Policy Act of 2005
(H.R. 6), by Brent Yacobucci, et al. For background on the MTBE issue, see CRS Report
RL32787, MTBE in Gasoline: Clean Air and Drinking Water Issues, by James McCarthy and
Mary Tiemann. For information on ethanol, see CRS Report RL30369, Fuel Ethanol:
Background and Public Policy Issues, by Brent Yacobucci and Jasper Womach.)
Ozone Nonattainment Area Deadlines. Another Clean Air Act provision that was
in the House-passed version of H.R. 6 dealt with the deadlines for attaining air quality
standards. Section 1443 of the bill would have extended deadlines for areas that have not
attained the ozone air quality standard if upwind areas “significantly contribute” to their
nonattainment.
Under the 1990 Clean Air Act Amendments, ozone nonattainment areas with higher
concentrations of the pollutant were given more time to reach attainment, but in return for
the additional time, they were required to implement more stringent controls on emissions.
Failure to reach attainment by the specified deadline was to result in reclassification of an
area to a higher category and the imposition of more stringent controls. Section 1443 would
have amended this system to extend deadlines (without requiring more stringent controls)
in areas affected by upwind sources of pollution. There was no comparable provision in the
Senate bill, and the conferees did not include the House provision in the enacted law.
The enacted version does establish a demonstration project, however, to address the
issue of upwind pollution. In Section 996, the enacted law requires EPA to work with State
and local officials in a multi-county Western Michigan project area to determine the extent
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of ozone and ozone precursor transport, to assess alternatives to achieve compliance with the
8-hour ozone standard apart from local controls, and to determine the timeframe in which
such compliance could take place. (Western Michigan is believed to be affected by pollution
originating in the Chicago and Milwaukee metropolitan areas.) EPA is prohibited from
imposing requirements or sanctions that might otherwise apply during the demonstration
project.
In addition, on October 7, the House passed provisions to extend deadlines in areas
affected by upwind pollution in H.R. 3893, a bill whose primary purpose is to facilitate the
construction of new petroleum refineries. The Senate has not taken action on this bill.
Conformity of Transportation Plans and SIPs. A fifth clean air issue considered
by 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. A total of 126 areas (474 counties) with a
combined population in excess of 159 million are subject to the SIP requirements for ozone,
and 225 counties with a combined population of 95 million are subject to SIP requirements
for fine particulates. 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, prior to
enactment of H.R. 3). Highway and 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 are 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.
The Clean Air Act provides no authority for waivers of conformity, and the only grace
period that has been 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 were 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 109th Congress, conformity provisions were included in H.R. 3 (P.L. 109-59), the
transportation bill that the President signed August 10. As enacted, the law requires less
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frequent conformity demonstrations (at least every four years instead of every two years), and
will shorten the planning horizon over which conformity must be demonstrated to 10 years
in many cases, instead of the former requirement of 20 years. The local air pollution control
agency will need to be consulted and public comments solicited if the planning horizon is
to be shortened. The law also establishes a 12-month grace period following a failure to
demonstrate conformity before a lapse would be declared.
Hurricanes Katrina and Rita. As state, local, and federal officials have responded
to Hurricanes Katrina and Rita, there has been discussion regarding whether environmental
regulations (including those under the Clean Air Act) might slow or impede response efforts
and whether regulation of fuels and fuel additives should be waived in order to facilitate
distribution of fuels in a system in which several refineries and pipelines were damaged or
shut down. In response to these concerns, various provisions of the Clean Air Act have been
waived by EPA. These waivers have addressed concerns regarding the impact of the
hurricanes and subsequent flooding on energy supplies within the four states that suffered
major damage, as well as impacts in other states. Because of the importance of the Gulf area
as both a producer of oil and gas and a refiner of petroleum products, EPA temporarily
waived regulations regarding gasoline and diesel fuel in all 50 states.
All of the fuel waivers were granted under the authority of Section 211(c)(4)(C) of the
Clean Air Act, as amended by P.L. 109-58, the Energy Policy Act of 2005. As amended, this
section allows EPA to temporarily waive a control or prohibition respecting the use of a fuel
or fuel additive if: (1) the Administrator determines that “extreme and unusual fuel or fuel
additive supply circumstances exist in a State or region” and these circumstances prevent the
distribution of an adequate supply to consumers; (2) these circumstances are the result of a
natural disaster, an Act of God, a pipeline or refinery equipment failure, or another event that
could not reasonably have been foreseen or prevented, and not the lack of prudent planning;
and (3) it is in the public interest to grant the waiver.
Four types of waiver have been issued. First, the Agency waived the volatility
requirements that apply to gasoline sold during the summer driving season. Lower volatility
gasoline is less prone to evaporation, thereby lowering emissions of the volatile organic
compounds that contribute to the formation of ground-level ozone. The volatility
requirements vary depending on region of the country, making the supply of gasoline
available in Northern states unusable in the South during summer months. The summer
volatility requirements expire on September 15 in most states. In order to prevent supply
disruptions that might otherwise have occurred, EPA waived these requirements beginning
August 30 in Alabama, Florida, Louisiana, and Mississippi, and, on August 31 extended the
waiver to all 50 states and the District of Columbia. As of October 25, this waiver had
expired in all states but continued in force in California, which would normally require low
volatility gasoline through October 31.
Second, to prevent supply disruptions, the agency waived the requirement that diesel
fuel sold for use in on-road vehicles contain no more than 500 parts per million sulfur. This
waiver permitted higher sulfur diesel fuel, which is allowed in construction equipment, farm
machinery, and other off-road vehicles, to be used in highway vehicles such as trucks and
buses. Sulfur content is normally limited because sulfur dioxide is a pollutant that affects
human health and the environment, and because sulfur in exhaust gases interferes with the
effective operation of pollution control devices. The agency decided, however, that the
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potential for shortages of compliant fuel outweighed the health and environmental impacts
of continued compliance, and waived the sulfur limit, first in the four states directly affected
by Katrina, and then, on August 31, in all 50 states and D.C., through September 15, 2005.
The waiver was subsequently extended through October 5 in 25 mostly Eastern and Southern
states and the District of Columbia, and extended again (through October 25) in 13 Southern
and Southwestern states. Separately, EPA delayed the effective date of the Texas Low
Emission Diesel program, which was to have been implemented October 1, and extended the
diesel sulfur waiver in Florida, Iowa, and Nebraska.
Third, beginning September 2, the agency waived the requirement that Richmond,
Virginia, use cleaner burning reformulated gasoline (RFG) — also because of fears of
inadequate supply. This waiver was later extended through October 20. Similar waivers
were granted to the St. Louis, Missouri, Houston-Galveston, and Dallas-Fort Worth areas.
Fourth, on September 1, EPA waived until September 15 certain low sulfur gasoline
requirements that apply to the Atlanta area. Atlanta has special gasoline sulfur requirements
as part of its State Implementation Plan for compliance with the ozone air quality standard.
This waiver was subsequently extended through October 25. Following Hurricane Rita, the
agency raised the per-gallon cap on sulfur in conventional gasoline produced at two specific
refineries, for five days and one week respectively, and allowed the fuel to be sold in 25
states.
EPA has also used enforcement discretion to allow on a temporary basis actions that
would otherwise violate the Clean Air Act or other statutes and regulations. Examples cited
in the press have included rules regarding vapor recovery at gasoline pumps and certification
and registration procedures for tank truck carriers. As of September 21, EPA had identified
12 cases in which enforcement discretion or “no action assurances” had been granted.
Several of these instances affected multiple facilities. In addition, EPA or the Department
of Justice extended consent decree compliance deadlines due to force majeure in some cases.
Although EPA appears to have exercised a great deal of flexibility in waiving
regulations to deal with potential fuel shortage situations, some in Congress have raised
concerns that new legislative authority is needed to permit Clean Air Act and other
environmental waivers and to expedite the permitting of new or expanded refineries. A
number of bills have been introduced on these subjects, including H.R. 3893, which passed
the House October 7, and S. 1772, which was blocked (on a tie vote) by the Senate
Environment and Public Works Committee, October 26. Among other provisions, H.R.
3893, would empower the Department of Energy to establish expedited schedules for issuing
refinery permits, including those under the Clean Air Act, and would modify CAA
provisions regarding fuel formulations and nonattainment areas. The Senate bill would
encourage refinery construction, too, by directing the Secretary of Commerce and the
Economic Development Administration to give priority to the construction of refineries in
communities affected by military base closures and by revising the process for issuing
permits for refinery construction and operation. It also would amend the Clean Air Act to
hold states harmless for emission levels resulting from emergency waivers granted by EPA.
For additional information on waiver issues, see CRS Report RL33107, Emergency Waiver
of EPA Regulations: Authorities and Legislative Proposals in the Aftermath of Hurricane
Katrina, by James McCarthy and Claudia Copeland.
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