The National Energy Policy Report: Environmental Permitting and Regulatory Issues

CRS Report for Congress
The National Energy Policy Report:
Environmental Permitting and Regulatory Issues
June 11, 2001
Claudia Copeland, M. Lynne Corn,
James E. McCarthy, Larry Parker
Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

The National Energy Policy Report:
Environmental Permitting and Regulatory Issues
Summary
On May 16, 2001, the National Energy Policy Development (NEPD) Group
headed by Vice President Dick Cheney submitted a report, “National Energy Policy,”
that outlines recommended policy changes that would affect energy supply, demand,
and environmental quality. The report provides extensive discussion of the current
energy situation, and makes 105 recommendations for actions. Throughout the
document, environmental protection needs are frequently mentioned in concert with
achieving the report’s goals of increasing supplies of energy; encouraging energy
conservation and alternative, renewable energy sources; and improving energy
efficiency. It also recommends streamlining of environmental permitting and reducing
constraints from certain environmental requirements for air quality in order to achieve
the goals of the plan.
How these policy changes may affect the environment is indeterminate at this
point. The NEPD report has few numeric goals, and, with some exceptions, the fuel
types, numbers, and locations of energy facilities are not specifically recommended.
Thus, specific environmental impacts connected with them, or mitigated by use of
various alternatives, can only be identified in the broadest terms. However, with or
without a national energy policy, the nation will inevitably face some environmental
tradeoffs in meeting future energy needs. Under virtually any energy policy scenario,
there will be discharges to streams, lakes and coastal waters; there will be air
emissions, some of which could be transported to distant waterbodies and airsheds;
and there will continue to be wastes produced during construction and operations that
disturb the land. At issue are what environmental risks these activities present, and
what energy and environmental protection strategies are likely to be the most effective
in avoiding unacceptable risk.
This CRS report examines a subset of the environmental issues associated with
the Administration’s policy outline. It focuses specifically on the environmental
permitting and regulatory policies presented in the NEPD report that deal with
streamlining of regulations; possible impacts on air quality, climate change, and water
quality; and pollution issues potentially associated with oil and gas exploration in the
Arctic National Wildlife Refuge (ANWR). It does not discuss the broad energy policy
or the inevitable, but currently unquantifiable, environmental implications of an
unspecified mix of energy activities. Increased use of renewable resources or nuclear
energy, for example, may result in fewer polluting emissions, while a different mix
with more use of conventional energy resources might result in more emissions.

Contents
Overview .................................................. 1
Environmental Permit Streamlining..............................2
Air Quality.................................................6
New Source Review......................................7
Multi-Pollutant Legislation.................................8
Climate Change............................................10
Water Quality.............................................11
The Arctic National Wildlife Refuge (ANWR).....................14
Legislative Context.........................................17
Conclusion ................................................ 18

The National Energy Policy Report:
Environmental Permitting and
Regulatory Issues
Overview
Faced with energy price increases nationwide and the complex energy problems
of California and the Pacific Northwest, in January 2001, President Bush established
the National Energy Policy Development (NEPD) Group headed by Vice President
Dick Cheney and directed it to develop a national energy policy.¹ On May 16, the
NEPD Group submitted its report, outlining policy changes that would affect energy
supply, demand, and environmental quality. The report provides extensive discussion
of the current energy situation and makes 105 recommendations for actions.² It calls
for increased energy production, increased resource extraction, and greater numbers
of powerplants. It recommends oil and gas exploration in the potentially oil- and gas-
rich and environmentally sensitive Arctic National Wildlife Refuge (ANWR), as well
as on other federal lands. It recommends a variety of incentives for increasing use of
alternative, renewable energy resources, and encouraging energy efficiency and
conservation. It also recommends streamlining of environmental permitting and
reducing constraints from certain environmental requirements for air quality in order
to achieve the goals of the plan.
How the policy changes in the plan may affect the environment is indeterminate
at this point. The NEPD report has few numeric goals, and, with some exceptions,
the fuel types, numbers, and locations of energy facilities are not specifically
recommended. Thus, specific environmental impacts connected with them, or
mitigated by use of various alternatives, can only be identified in the broadest terms.
However, some of the qualitative tradeoffs, while not discussed explicitly in this
report, can be identified; for example, they include the facts that:
!Increased reliance on coal will adversely affect air quality as a result of
increased pollutant emissions and will add to greenhouse gas emissions, while
substitution of natural gas and nuclear power for coal and oil will have less of
an impact on air emissions.

¹ For a discussion of energy policy, including the NEPD report, see CRS Issue Brief IB10080,
Energy Policy: Setting the Stage for the Current Debate.
² National Energy Policy; Reliable, Affordable, and Environmentally Sound Energy for
America’s Future, Report of the National Energy Policy Development Group, May 2001.

163 p. (Hereafter National Energy Policy, or the NEPD report)

!Despite its benefits from the air quality perspective, nuclear power has negative
environmental impacts that other energy sources do not from the perspectives
of waste disposal and potential impact from accidents.
!Development of environmentally sensitive areas such as ANWR for oil and gas
will have not only ecological implications from routine operations but also
potential risks of increased pollution and oil spills.
!To the extent energy efficiency gains and conservation efforts are accelerated
nationally, less energy will be used in the future with less negative effect on the
environment.
With or without a national energy policy, if the Gross Domestic Product (GDP)
doubles over the next 25 years, as has been predicted, and energy consumption to
support that economic growth increases by 32%, as the NEPD report predicts, the
nation will inevitably face some environmental tradeoffs in meeting future energy
needs. Even if the cleanest, newest and most environmentally benign energy
technologies are utilized in all cases, and even if conservation and use of more energy
efficient technologies reduce the growth of energy demand, some impacts on air and
water quality and land resources appear inevitable. Under virtually any energy policy
scenario, there will be discharges to streams, lakes and coastal waters; there will be
air pollutant emissions, some of which could be transported to distant waterbodies
and airsheds; and there will be wastes produced during construction and operations
that disturb the land. At issue are what environmental risks these activities present,
and what energy and environmental protection strategies are likely to minimize those
risks.
This CRS report examines a subset of the environmental issues associated with
the Administration’s policy outline. It focuses specifically on the environmental
permitting and regulatory policies presented in the NEPD report that deal with
streamlining of regulations; possible impacts on air quality, climate change, and water
quality; and pollution issues potentially connected with ANWR. It does not discuss
the broad energy policy or the inevitable, but currently unquantifiable, environmental
implications of an unspecified mix of energy activities.
Environmental Permit Streamlining³
Streamlining of environmental permits and reviews has been an issue in past
energy policy debates, and the NEPD report raises the issue once again. Specific
environmental requirements and complexities of obtaining permits have been cited as
contributing to or fundamentally causing some energy project delays.
Examination of actual cases, however, often identifies a range of factors that can
affect, delay or even derail major projects, including economic costs and uncertainties
and a lack of consensus on the need for a project, in addition to environmental rules
and permits. Whether environmental rules are the central reason for delays in building
energy facilities is often debated. In addition to federal requirements, many of the

³ Prepared by Claudia Copeland, Specialist in Resources and Environmental Policy.

relevant permits and regulations are state or local. Comprehensive streamlining would
likely involve all levels of government.
Attempts to simplify environmental review procedures in order to speed
decisionmaking are rarely simple and often lead to controversies. In response to the
energy crisis of the late 1970s, Congress and the Carter Administration considered
proposals to create an Energy Mobilization Board, a new agency empowered to put
priority energy projects on a “fast track” to completion, and to give the board
authority to cut through red tape and delays affecting key energy projects. The major
controversy over this proposal, debated throughout 1979 and 1980, was whether the
board would have the power to waive or override substantial requirements of federal,
state and local law, particularly environmental laws. Ultimately, Congress rejected
the conference report on an omnibus energy bill that would have created the board
and given it such authority.
The NEPD report does not propose anything on the order of the earlier proposed
Energy Mobilization Board with powers to override statutory requirements, but one
of its first recommendations concerns permitting of energy-related facilities.⁴ The
theme of streamlining permits is the centerpiece of Chapter 3 of the report,
“Protecting America’s Environment.”
The NEPD Group recommends the President issue an Executive Order to
rationalize permitting for energy production in an environmentally sound manner
by directing federal agencies to expedite permits and other federal actions
necessary for energy-related project approvals on a national basis. This order
would establish an interagency task force chaired by the Council on Environmental
Quality to ensure that federal agencies responsible for permitting energy-related
facilities are coordinating their efforts. The task force will ensure that federal
agencies set up appropriate mechanisms to coordinate federal, state, tribal, and
local permitting activity in particular regions where increased activity is expected.
In response, two days after release of the NEPD report, President Bush issued
Executive Order 13212, “Actions to Expedite Energy-Related Projects.” The
Executive Order states that “it is the policy of this Administration that executive
departments and agencies shall take appropriate actions, to the extent consistent with
applicable law, to expedite projects that will increase the production, transmission, or
conservation of energy.” It establishes a multi-agency task force to assist agencies in
expediting review of permits to accelerate completion of energy-related projects,
increase energy production and conservation, and improve transmission of energy.
Indeed, a number of recommendations throughout the report address three
aspects of energy project permitting and regulatory streamlining: first, the need for
faster decisions; second, the need for more comprehensive regulations, especially
where multiple agencies are involved; and third, the need to provide industry with
regulatory certainty. For example, the need for faster decisions is reflected in the
recommendation for a task force to expedite permits and other necessary federal
actions and for expedited renewal of the Trans-Alaska Pipeline System lease and

⁴ National Energy Policy, p. 3-13.

rights-of-way.⁵ Elsewhere the report recommends that the Environmental Protection
Agency (EPA) and the Department of Energy streamline the permitting process for
refineries, where possible, to ensure that regulatory overlap is limited. It also
recommends that these agencies adopt comprehensive regulations, covering more than
one pollutant and requirement affecting refinery operations and in doing so, consider
the rules’ cumulative impacts and benefits.⁶ Further, several recommendations urge
greater regulatory certainty “relating to coal electricity generation through clear⁷⁸
policies that are easily applied to business decisions” and for refinery owners.
It is too early to know what actions the task force created by E.O. 13212 will
take or precisely how the policy set forth in it will be implemented. Responses could
range from organizing more coordinated consultation among agencies within existing
administrative and legal regimes; to promoting and facilitating non-traditional methods
of meeting regulatory requirements (including market-based approaches to pollution
control, such as emissions trading); to seeking statutory changes to waive, modify,
or set stringent deadlines on regulatory or permit requirements for energy projects;
or even to proposing creation of an Energy Mobilization Board-type agency. It is
unknown whether the task force and agencies will propose streamlining for individual
energy projects, on an “as needed” basis, or more broadly for all projects of certain
types.
The simplest actions (such as improved interagency coordination) may raise few
concerns among interested parties and likely could be done administratively, but more
extensive proposals, when detailed, are likely to be criticized, at least by some
stakeholder groups. More far-reaching actions, if proposed, are likely to require
changes to legislation. Environmental advocates often view proposals for
streamlining as being intended to reduce environmental protection by waiving
requirements of federal laws or overriding reviews conducted by environmental and
resource agencies. Further, environmental and other groups have long raised
concerns about proposals to speed up permitting processes by reducing public input
on permit decisions. Public involvement is generally seen as beneficial to sound
decisionmaking, but at times it can be difficult to adequately allow for public input
without introducing time-consuming public comment processes. Environmental
justice issues have been raised by some who are concerned that streamlining could
result in increased siting of facilities in poorer, minority, more vulnerable areas.
EPA requirements and permits often are blamed for project delays and red tape,
but in reality, responsibility for evaluating and approving energy-related projects is
spread widely across the federal government (in addition to state and local
governments), pursuant to a number of statutory authorities. Among the many federal
laws and regulations that can come into play when permits are issued for energy
facilities, proposals to streamline energy project decisions could involve some of the
following.

⁵ Ibid., p. 7-10.
⁶ Ibid., p. 7-14.
⁷ Ibid., p. 5-15.
⁸ Ibid., p. 7-14.

!The National Environmental Policy Act (NEPA) requires preparation of an
environmental impact statement (EIS) for major activities that significantly
affect the environment; EISs are prepared by a designated lead federal agency.
In addition, other federal agencies are responsible for reviewing and
commenting on environmental impact statements, based on the commenting
agency’s expertise, in order to assess their adequacy and to coordinate
interagency decisionmaking. NEPA’s EIS requirements provide interested
parties with much information. While NEPA does not provide direct authority
to stop projects, opponents of energy and non-energy projects have on
occasion found an opportunity to require agencies to conduct studies or
otherwise use EISs so that decisions were delayed.
!The Clean Air Act (CAA) requires that major stationary sources of air
pollution (primarily industrial facilities, utilities, and large commercial
operations) obtain a permit from their respective state, tribal, or local
permitting authority to operate, as well as to undertake new construction or
expansion of an existing facility (see discussion of new source review, below).
!The Clean Water Act (CWA) requires that, prior to going into operation,
plants must obtain permits which authorize discharge of processed wastewater.
Most of these are issued by states. In addition to those standard requirements
to control water pollution, the Act also contains a separate permit system
operated by the U.S. Army Corps of Engineers under which advance approval
must be obtained for any project involving dredging or filling of wetlands.
!The Rivers and Harbors Act of 1899 requires permits from the Corps of
Engineers for construction of any dam or dike in a navigable waterway or any
structure in or over any navigable waterway, if the structure or work affects
the course, location, or condition of the waterbody. The construction of
bridges and causeways over a waterbody also requires a permit, which is issued
by the U.S. Coast Guard.
!The Fish and Wildlife Coordination Act (FWCA) requires preparation of a
mitigation plan for possible project impacts on fish and wildlife.
!The Endangered Species Act (ESA) requires federal agencies to consult with
the Fish and Wildlife Service (FWS) or the National Marine Fisheries Service
(NMFS) to determine if any listed species that might be affected by a proposed
project would be jeopardized by it or if their critical habitat would be adversely
modified. FWS or NMFS (depending on the affected species) must give a
biological opinion on the risk of jeopardy or of adverse modification. In the
rare cases where jeopardy or adverse modification is found, the agency must
offer reasonable and prudent alternatives to the proposal; these alternatives
usually involve timing, scope, or location of the project. In very rare cases
(less than 1%), no alternatives consistent with the survival of the species can
be found for the project.
!The Marine Mammal Protection Act (MMPA) prohibits the taking (e.g., to
harass, hunt, capture, or kill, or attempt to harass, hunt, capture, or kill) of any
marine mammal. For any activities that may incidentally take or harass marine

mammals, a permit must be obtained from the National Marine Fisheries
Service or the Fish and Wildlife Service.
!The Archeological Preservation Act and the Historic Preservation Act,
administered by the National Park Service, may require preparation of
archeological or historic surveys of the proposed project site.
!Projects involving transit or transmission across public lands may require
obtaining rights-of-way from relevant federal agencies, including the Bureau
of Land Management, Bureau of Reclamation, Bureau of Indian Affairs,
National Park Service, and Forest Service.
!The Coastal Zone Management Act (CZMA) requires certification by states
that projects to be located in a state’s coastal zone are consistent with the
state’s coastal zone management program. The Clean Water Act requires a
similar state certification concerning compliance with state water quality
standards (see discussion below).
In some cases, energy projects also could trigger specific permit and regulatory
requirements related to hazardous waste transportation and disposal, underground
injection of wastes, reclamation of mined land, or nuclear waste transportation and
disposal.
Several of these laws – including NEPA, the Clean Air Act, the Clean Water Act,
and the Endangered Species Act – explicitly allow citizens to bring legal actions
against agency heads for failure to carry out non-discretionary substantive and
procedural duties under the laws and against regulated entities for violations of
statutory and permit requirements. Citizen groups value the additional enforcement
authority available in these laws. As such, citizen suits could be an important tool for
those who might object to regulatory streamlining proposals that they view as
compromising existing environmental safeguards.
Air Quality⁹
Among all of the environmental issues discussed in the NEPD report, air quality
is the most prominent. It is in discussing clean air requirements that the report is most
explicit both in describing regulatory constraints on energy projects and advocating
specific legislation to achieve two significant policy goals of the plan: reducing and
capping air emissions from electric power generators and expediting regulatory and
permitting processes for energy facilities including refineries and oil and natural gas
pipelines.
The NEPD report makes two recommendations regarding air quality. First, it
recommends a review of the air emission regulatory process known as “New Source
Review.” Second, it proposes to strengthen emission controls on powerplants
through new legislation (“multi-pollutant legislation”). The net effect of these steps

⁹ Prepared by James E. McCarthy, Specialist in Environmental Policy.

will be difficult to gauge until the plan’s general recommendations are embodied in
specific regulatory actions and legislative language.
New Source Review. In an apparent effort to ease regulatory burdens on
powerplants and refineries and provide additional incentives to expand output at
existing facilities, the NEPD report recommends a review of the Clean Air Act’s New
Source Review (NSR) requirements:
The NEPD group recommends that the President direct the Administrator of the
Environmental Protection Agency ... to review New Source Review regulations,
including administrative interpretation and implementation, and report to the
President within 90 days on the impact of the regulations on investment in new
utility and refinery generation capacity, energy efficiency and environmental¹⁰
protection.
The policy also recommends that the President direct the Attorney General to review
existing NSR enforcement actions to ensure “that they are consistent with the Clean
Air Act and its regulations.”¹¹
The most controversial aspect of the current NSR process has been EPA’s
decision to apply New Source Performance Standards to existing stationary sources
of air pollution that have been modified. In Section 111, the Clean Air Act clearly
states that sources which are subject to NSR include modifications of existing sources
as well as plants that are totally new; but industry has generally avoided the NSR
process 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 changes at
their plants were routine or not. As a result of these reviews, since late 1999, EPA
and the Department of Justice have filed suit against 10 electric utilities, claiming that
the utilities made major modifications to 38 coal-fired electrical generating units in 12
states, extending their lives and increasing their electric generating capacity without
undergoing required New Source Reviews and without installing best available
pollution controls. As explained by then-EPA Administrator Carol Browner,
The companies were allowed to perform routine maintenance, but they were not
allowed to make significant changes to the plant - such as increased generating
capacity, increased burning of coal, or modifications that prolonged the life of the
plant - without seeking permits and adding the best available pollution control¹²
devices.
Three of the 10 utilities charged with NSR violations (Tampa Electric, Virginia
Power, and Cinergy) subsequently settled with EPA, agreeing to spend more than $1
billion each over the next decade on pollution controls or fuel switching in order to

¹⁰ National Energy Policy, p. 7-14.
¹¹ Ibid.
¹² Remarks of EPA Administrator Carol M. Browner at a clean air enforcement press
conference, Washington, D.C., Nov. 3, 1999, as cited by Julie R. Domike and Alec C.
Zacaroli in “Reinterpretation of NSR Regulations Could Have Costly Implications for
Businesses,” Daily Environment Report, March 7, 2000, p. B-1.

reduce emissions at their affected units. Between July 25, 2000, and May 11, 2001,
the Agency also has reached agreement with six petroleum refiners representing nearly
30% of industry capacity. The refiners agreed to settle potential charges of NSR
violations by paying fines and installing equipment to eliminate 143,000 tons of
pollution.¹³
Companies that have not settled with EPA and other critics of the Agency’s
actions claim that EPA is reinventing the rules. As expressed in one legal analysis:
Since 1974, when regulations implementing the NSR requirements were first
promulgated, companies and states have made numerous determinations regarding
the applicability of the routine maintenance exclusion to certain industrial
activities. Over this period, there has been scarce, if any, guidance or input from
EPA on the exclusion. EPA's inaction has led both industry and state regulators
to conclude they have been applying the exclusion correctly. Now, decades later,
EPA has launched a series of initiatives against different industries that call into
question what ultimately could be thousands of compliance decisions made by
hundreds of companies, many of which were endorsed by authorized state agencies¹⁴
charged with implementing the Clean Air Act.
In “reinventing the rules,” the Agency is providing disincentives for power
producers and refineries to expand output, according to critics. These critics include
the National Coal Council, an advisory committee to the Secretary of Energy,
composed largely of industry executives, that stated in a May 3 report that existing
coal-fired power plants could make technical improvements to produce an additional¹⁵

40,000 megawatts of electricity if EPA would loosen current NSR restrictions.

Because the NEPD report does not make specific recommendations, but simply
calls for a review of current regulations and enforcement actions, it is difficult to
conclude what effect these reviews will have. The vagueness of these
recommendations hasn’t prevented interest groups and analysts, however, from
concluding that the Administration intends to roll back NSR requirements, which
these commenters argue could lead to substantial increases in emissions.¹⁶
Multi-Pollutant Legislation. Simultaneous with its proposal for review of
the NSR requirements, the NEPD proposes to strengthen emission controls on

¹³ See “BP Amoco, Koch to Pay $14.5 Million In Fines, Prevent Emissions at Refineries,”
Daily Environment Report, July 26, 2000, p. A-8, “Three Refiners Settle Alleged NSR
Violations, Will Install $400 Million in Emission Controls,” Daily Environment Report,
March 23, 2001, p. A-2, and “Petroleum Refiner to Pay $265 Million for Making Upgrades
Under Settlement,” Daily Environment Report, May 14, 2001, p. A-1.
¹⁴ Julie R. Domike and Alec C. Zacaroli, “Reinterpretation of NSR Regulations Could Have
Costly Implications for Businesses,” Daily Environment Report, March 7, 2000, p. B-1.
¹⁵ See “Federal Coal Panel Calls for Loosening Clean Air Act Requirements for Power
Plants,” Daily Environment Report, May 2, 2001, p. A-1.
¹⁶ See, for example, “White House Plan Offers Possible Relief to Power Companies in
Pollution Lawsuits,” Daily Environment Report, May 18, 2001, p. AA-1; and Michael
Isikoff, “A Plot to Foil the Greens,” Newsweek, June 4, 2001, p. 36.

powerplants through new legislation. This proposal is more specific than the NSR
recommendations:
The NEPD group recommends that the President direct the EPA Administrator to
work with Congress to propose legislation that would establish a flexible, market-
based program to significantly reduce and cap emissions of sulfur dioxide, nitrogen¹⁷
oxides, and mercury from electric power generators.
Since enactment of the Clean Air Act Amendments of 1990, EPA has taken
numerous regulatory actions to reduce emissions of these pollutants from coal-fired
electric powerplants. The first of these, the regulation of sulfur dioxide and some
nitrogen oxide emissions to reduce acid precipitation, which is required under Title
IV of the Act, had statutory deadlines in 1995 and 2000. Other regulatory actions,
which have yet to be implemented, include the Ozone Transport Rule (or “NOx SIP
call”) requiring powerplants in 21 eastern states and the District of Columbia to
reduce emissions of nitrogen oxides during the summer ozone season beginning May

31, 2004; various state actions to control emissions of NOx, sulfur dioxide, mercury,

and in at least one case carbon dioxide; and an EPA decision announced in December
2000 to regulate mercury emissions from electric utilities. The mercury regulations
are expected to be proposed in 2003, with an effective date of 2007 or 2008.
Proposals to control carbon dioxide emissions from powerplants, to address global
climate change, have also been advanced, though not by EPA.
The number and variety of prospective regulations on powerplant emissions has
suggested to many in industry, the Congress, and the Administration that the time may
be ripe for comprehensive, multi-pollutant legislation to regulate powerplant
emissions. The key questions are how stringent the controls will be, and whether
carbon dioxide (CO²) will be among the emissions subject to controls.
Regarding the first of these issues, five bills that have been introduced as of early
June would require reduction of NOx emissions to 1.5 or 1.6 million tons (a nearly
80% reduction from 1998 utility emission levels) and reduction of sulfur dioxide
emissions to 2.23 - 4.45 million tons (a reduction of roughly 65% - 80% versus
1998). Regarding mercury, two of the bills require EPA to determine the level of
reductions, while the other three require about a 90% reduction from current levels
of utility emissions. In general, these reductions would take place by 2005 or 2007,
depending on the bill. (For additional information, see CRS Report RS20894,
Electricity and Air Quality: Comparison of Proposed Multi-pollutant Legislation.)
The Administration has not taken a position on either the timing or stringency of its
proposed reductions.
The Administration opposes controls on CO², the other critical issue in multi-
pollutant legislation. Its critics, however – and even some of its friends – note that
the goal of providing regulatory certainty as a means of encouraging investment in
new powerplants may not be met without its inclusion. As one energy industry CEO
noted at a Senate hearing:

¹⁷ National Energy Policy, p. 3-3.

... the prospect of future CO² emissions controls is a major source of uncertainty
for the power generation sector. If CO² requirements are imposed that compel
massive expenditures by companies to switch coal-fired power plants to natural
gas or to purchase expensive allowances, the sizable investments we will make to¹⁸
install pollution control equipment over the next 10 years could be wasted.
Whatever the merits of CO² regulation, some form of multi-pollutant legislation
is expected to be a relatively high priority as Congress reacts to the recommendations
of the NEPD report. (For additional information, see CRS Issue Brief 10065, Clean^th
Air Act Issues in the 107 Congress.)
Climate Change¹⁹
Chapter 3 of the NEPD report, titled “Protecting America’s Environment,”
acknowledges the connection between energy and greenhouse gases, particularly
carbon dioxide emitted in the combustion of fossil fuels, that contribute to
atmospheric change and possible global warming. The report states, "Energy-related
activities are the primary sources of U.S. man-made greenhouse gas emissions,
representing about 85 percent of the U.S. man-made total carbon-equivalent
emissions in 1998."²⁰ It also notes the slowing of the rate of growth in U.S.
greenhouse gas emissions, and the reduced carbon-intensity of the U.S. economy (the
amount of carbon dioxide emitted per each unit of GDP), which it states declined by

15% during the 1990s.

The NEPD group makes only one specific recommendation with respect to
climate change: federal agencies are directed to continue climate change research, to
continue identifying appropriate market-based mechanisms and incentives for
greenhouse gas reductions, to continue developing new control technologies; and to²¹
cooperate in these areas with allies. As such, there are no new initiatives in the plan
for addressing the climate change issue, either domestically or internationally. Instead,
the group focuses on existing programs and voluntary actions to address the issue.²²
Stating that the President is committed to addressing the issue, the NEPD report notes
that risks to the global environment can be diminished through energy efficiency,
educational programs, and technology transfer.²³
With respect to the energy plan per se, the potential for controls on carbon
dioxide are seen primarily as a barrier to construction and operation of coal-fired
electric generating facilities (see Air Quality discussion above). As stated in the plan:

¹⁸ Statement of James E. Rogers, Vice Chairman, President, and CEO, Cinergy Corp., in
Clean Air Act: Incentive-Based Utility Emissions Reductions, Hearing, Senate Committee
on Environment and Public Works, Subcommittee on Clean Air, Wetlands, Private Property
and Nuclear Safety, May 17, 2000, p. 87.
¹⁹ Prepared by Larry Parker, Specialist in Energy Policy.
²⁰ National Energy Policy, p. 3-10.
²¹ Ibid., p. 8-16.
²² Ibid., p. 3-11.
²³ Ibid., p. 8-15.

Uncertainty about future environmental controls is of particular concern for
companies that operate existing coal power plants. Regulations under development
include a variety of measures requiring reductions in emissions....In
addition,...uncertainty over global and domestic efforts to reduce carbon dioxide
emissions also play a role. This regulatory uncertainty discourages power
producers from building coal power plants and is one reason the United States is
relying so heavily on natural gas power generation to meet growing electricity²⁴
demand.
The NEPD report is silent on ways to reduce or mitigate the regulatory
uncertainty with respect to carbon dioxide control that it views as a major constraint.
Stating “there is increasing awareness of global competition for fossil fuels and their
potential threats to the global environment,”²⁵ the plan does not indicate how that
awareness might be addressed with respect to supplying the future energy needs of the
Nation. It does note that electricity generated by nuclear power avoids carbon dioxide
emissions, and natural gas has half the emissions of coal; but discussion of other
sectors’ (e.g., transportation) effects on carbon dioxide emissions are not addressed.
The NEPD report does point out that a Cabinet-level review of climate change policy
is underway which could clarify the situation.
Water Quality²⁶
Energy extraction and production can degrade water quality through discharges,
but the NEPD report observes that federal and state regulators, working with
businesses and communities, can minimize adverse impacts through decisions on siting,
technology, and mitigation of environmental damage. It also notes that programs to
reduce air pollution, such as reducing air emissions of NOx and SO², can help clean up
waterbodies by reducing deposition of harmful pollutants.²⁷
The report’s recommendations have fewer implications for water quality than for
other environmental issues. Some implications are unclear for now and could depend
on outcomes of efforts to streamline environmental permits (discussed above).
Impacts on water quality protection could occur, for example, if the recommendations
lead to modifying discharge permit requirements applicable to powerplants or to
waiving water quality-related requirements for energy production facilities,
powerplants, resource extraction projects, etc. The report does not directly propose
such actions, but they could be addressed through implementation of E.O. 13212,
Actions to Expedite Energy-Related Projects.
A number of Clean Water Act (CWA) regulatory and permit requirements apply
to energy facilities and, as discussed in Environmental Permit Streamlining, above,
clearing the hurdle of such federal requirements can be complex and time-consuming.
At the same time, constraints may not be exclusively due to federal requirements, since
state and local governments have important roles, as well. These implications for

²⁴ Ibid., pp. 5-13 - 5-14.
²⁵ Ibid., p. 8-15.
²⁶ Prepared by Claudia Copeland, Specialist in Resources and Environmental Policy.
²⁷ National Energy Policy, pp. 3-7 - 3-8.

permitting and project approval become more clear in an example that arises from the
NEPD report’s recommendation for administrative and legislative reform of the
licensing process for hydropower dams.
Hydropower dams provide a low-cost, no-emission source of electricity. But the
report acknowledges that, unless properly designed and operated, hydropower dams
can injure or kill fish, such as salmon, by blocking their passage to upstream spawning
pools. Operation of dams can impede downstream migration of young fish and can
adversely affect stream temperature needed to sustain fish and wildlife.
According to the Federal Energy Regulatory Commission (FERC), over the next

15 years, licenses for about 240 non-federal dams (representing about 2% of total U.S.

electric generating capacity) will expire and must be re-issued if the facilities are to
continue operating. The NEPD report asserts that the most significant challenge
confronting hydropower is regulatory uncertainty regarding the federal licensing
process, which can be lengthy in part because decisionmaking authority is spread
across a number of federal and state agencies having different public policy goals.
While not expressly discussed in the report, the recommendation that the licensing
process be reformed has implications for the Clean Water Act, which was in part the
subject of a recent FERC report.²⁸ Section 401 of that Act requires an applicant for
a federal license or permit that proposes to conduct any activity, including dams, that
may result in a discharge to navigable waters to provide the federal agency with a
certification from the state in which the discharge originates that the discharge will
comply with the Act, including state water quality standards requirements. (For
additional information, see CRS Report 97-488, Clean Water Act Section 401:
Background and Issues.) The FERC report concludes that the most common cause
of delayed hydropower licensing proceedings is untimely receipt of state Section 401
certification under the Clean Water Act.
Section 401 provides states with two distinct powers: one, the power indirectly
to deny federal permits or licenses by withholding certification; and two, the power to
impose conditions upon federal permits by placing limitations on certification.
Generally, Section 401 certification has been applied to hydroelectric projects seeking
a license from FERC and for dredge-and-fill activities in wetlands and other waters that
require permits from the Army Corps of Engineers under Section 404 of the CWA and
Sections 9 and 10 of the Rivers and Harbors Act. It also is applied to permit
requirements for industrial and municipal point source dischargers under Section 402
of the Act. In addition, it has the potential to be applied to a range of other activities
that could affect water quality, a point that has increasingly become an issue.
In recent years, some states have come to view Section 401 as an important tool
in their overall programs to protect the chemical as well as the physical and biological
integrity of their waters. Some have begun using Section 401 to address a wide range
of impacts to the quality of their waters, including impacts to aquatic habitat such as
wetlands where issues of non-chemical impacts arise. Through Section 401, some

²⁸ Report to Congress prepared by the Staff of the Federal Energy Regulatory Commission.
“Hydroelectric Licensing Policies, Procedures, and Regulations, Comprehensive Review and
Recommendations.” May 2001. 145 p.

states have addressed such project impacts as inadequate river flow, inundation of
aquatic habitat, dissolved oxygen levels, and impacts on fish and other wildlife.
This expanded use of Section 401 has, in turn, led to tensions between state and
federal agencies over the scope of the states' Section 401 authority, particularly the
extent to which states can legally address water flow requirements in water quality
standards. Two recent Supreme Court cases have held that states have broad authority
to condition 401 certification on compliance with all applicable water quality-related
laws. As a result, states acting pursuant to the CWA can regulate not only water
quality (such as the physical and chemical composition of the water), but also water
quantity (the amount of water released by a project) and state-designated water uses
(such as protection of fish and recreation), while FERC lacks authority to determine
whether such conditions are beyond the scope of Section 401.
FERC’s view is that state water quality certifications impose requirements on
projects, without any obligation to take into account the benefits of hydropower or
other competing interests. Most troublesome, according to FERC, are the conditions
controlling minimum instream flows imposed especially to protect fish, as these flows²⁹
have a direct impact on a project’s power generation and economic viability. In order
to reduce the time and cost of licensing, FERC recommends that Congress amend the
CWA or the Federal Power Act to clarify that water quality certification is limited to
physical and chemical water quality parameters related to a hydropower facility.
While the FERC report focuses on CWA state certification issues in particular,
the NEPD’s broad recommendation for reform of hydropower licensing could affect
implementation of other environmental laws. A number of statutes affect the licensing
process (including the Endangered Species Act, Coastal Zone Management Act,
National Historic Preservation Act, Federal Land Policy and Management Act, and the
Wild and Scenic Rivers Act). These laws allow other federal agencies to affect
licensing actions, through consultation, project conditioning, or limits on siting or
operation. FERC recommends that it be authorized to reject or modify such conditions
if they are inconsistent with the Commission’s public interest determinations.
Opponents of such recommendations believe that federal resource agencies must retain
a mandate to protect resources and environmental quality by being allowed to attach^t^h
operating conditions to dam licenses. Several legislative proposals in the 107
Congress (H.R. 1832, S. 71, and S. 388) would impose time deadlines and
decisionmaking standards on the Department of the Interior for imposing conditions
under various laws on projects located on federal reservations and on the Departments
of Interior and Commerce for project conditions related to fishways. These bills reflect
concerns also discussed in the FERC report.
FERC’s conclusions and recommendations have been challenged. For example,
in a recent report, the General Accounting Office stated that FERC lacks sufficient
data to make reasonable conclusions about the causes behind costs and delays in the
relicensing process.³⁰ Environmentalists criticize efforts to streamline the licensing

²⁹ Ibid. p. 16.
³⁰ U.S. General Accounting Office. “Licensing Hydropower Projects: Better Time and Cost
(continued...)

process, asserting that the hydroelectric industry seeks to limit environmental
regulations and reduce necessary environmental protections. Past proposals to restrict
states’ authority to implement CWA Section 401 certification have been controversial
both with environmental groups and with state officials. State representatives argue
that restricting the scope of their certification authority would deprive states of the
ability to protect and maintain beneficial uses of water and would undermine states’
investments in pollution control efforts. In their view, states are best situated to
determine whether a federally permitted activity will protect the environmental values
and uses of a waterbody that are established by states. The NEPD recommendation
for reform of hydropower licensing suggests that these issues will be a topic of
discussion in connection with energy policy debate.
The Arctic National Wildlife Refuge (ANWR)³¹
Proposals to develop the potential oil and gas resources of the coastal plain of the
Arctic National Wildlife Refuge(ANWR) have been considered for over 25 years.
During that time, the discussion of impacts has centered especially on effects on
wilderness values and wildlife. (For a discussion of ANWR development issues as a
whole, see CRS Issue Brief 10073, Arctic National Wildlife Refuge: The Next
Chapter.) However, opponents of energy development in the Refuge also point to
potential effects on air and water quality and to potential hazardous waste³²
contamination. Supporters of development counter with the technological advances
of the last 20 years that reduce the threat of such impacts. The NEPD Group
...recommends that the President direct the Secretary of the Interior to work with
Congress to authorize exploration and, if resources are discovered, development of
the 1002 Area of ANWR. Congress should require the use of the best available
technology and should require that activities will result in no significant adverse³³
impact to the surrounding environment.
Though background material is abundant in the plan, no further detail relating to the
meaning of “best available technology” or “no significant adverse impact” are given.
Specific legislative proposals have not been included in the plan.
Federal regulatory and permitting authority for pollution matters on ANWR
comes from a number of statutes, including the Clean Air Act; the Clean Water Act;

³⁰ (...continued)
Data Needed to Reach Informed Decisions about Process Reforms.” GAO-01-499. May

2001. 35 p.

³¹ Prepared by M. Lynne Corn, Specialist in Natural Resources.
³² Some groups also emphasize spills from the pipeline carrying oil to the south, or raise the
specter of tanker spills at the southern terminus of the pipeline. Such off-site effects are not
considered here.
³³National Energy Policy, p. 5-10. The plan proposes to use the initial competitive bids if
The Refuge is opened for funding research on alternative and renewable energy (p. 6-7). It
also proposes that royalties that would be paid on any oil that might be found should be used
for land conservation programs, and for maintenance and improvements on federal lands (p.

3-8).

the Coastal Zone Management Act; the Comprehensive Environmental Response,
Compensation, and Liability Act; the Endangered Species Act; the Fish and Wildlife
Coordination Act; the Migratory Bird Treaty Act; the Marine Mammal Protection Act;
the National Environmental Policy Act; the Resource Conservation and Recovery Act;
the National Wildlife Refuge System Improvement Act; the Safe Drinking Water Act;
the Toxic Substances Control Act; and others. In some cases, pollution control
permits required by certain of these laws expressly call for best available control
technology – for example, the new source review permits under the Clean Air Act and
discharge permits under the Clean Water Act. Other permits may implicitly presume
what might be called best available (control) technology.
Federal agencies involved in enforcing these laws include the Environmental
Protection Agency, the Army Corps of Engineers, the Fish and Wildlife Service, the
National Marine Fisheries Service, the Coast Guard, and others. State regulation of
pollution is carried out primarily through the Alaska Department of Environmental
Conservation (ADEC), acting through various state laws, as well as through delegated
federal authorities. Overall, the permitting processes would involve a patchwork of
agencies and levels of government and diverse criteria for issuance. Permitting and
regulatory issues that could arise in an effort to open ANWR include those discussed
under Environmental Permit Streamlining, above. In addition, some of the following
are likely to be particularly important:
!NEPA requires an Environmental Impact Statement (EIS) for major federal
actions significantly affecting the human environment. In 1987 the Department
of the Interior released a Final Legislative Environmental Impact Statement
(FLEIS) as part of the Administration’s proposal to open ANWR. Is that
FLEIS sufficient for compliance with NEPA, or should a new EIS be prepared?
Knowledge of the biological and physical environment in the arctic has
increased markedly and technology has made major advances since 1987,
making it likely that a new EIS could differ significantly in assessing likely
impacts of exploration and development. Preparation of a new EIS could be
expected to take one or more years, and probably delay exploration and
development. Congress could require a new EIS, deem the 1987 report
adequate for compliance (thereby foreclosing potential challenges on those³⁴
grounds), or remain silent on the issue.
!Are water resources adequate to support exploration and development, and to
what extent should such matters be handled under existing state or federal
authorities, or in legislation or new regulations? Modern exploration techniques

³⁴For example, in the 107^th Congress, in S. 388, a comprehensive energy bill introduced on
Feb. 26, 2001, provides for opening ANWR. Section 505 states “The ‘Final Legislative
Environmental Impact Statement’... is hereby found by the Congress to be adequate to satisfy
the legal and procedural requirements of the National Environmental Policy Act of 1969 with
respect to actions authorized to be taken by the Secretary to develop and promulgate the
regulations for the establishment of the leasing program authorized by this title ....” Congress
has also used this approach in past energy projects: in authorizing the Department of the
Interior to grant right-of-way for construction of the Trans-Alaska Pipeline System (P.L. 93-
153), Congress barred further judicial review of the adequacy of its EIS, which had been
challenged.

rely heavily on ice roads and ice drill pads. The Refuge has substantially less
water than Prudhoe Bay and other state-owned oil fields to the west; average
annual precipitation is less than 10 inches. It might then be necessary to
augment existing supplies. One common augmentation technique, the dredging
of gravel holding ponds near rivers, would require §404 permits under the Clean
Water Act; state permits might also be necessary. Some fear that effects on
streams and riparian habitats may be substantial, either from the water use itself,
or from methods to increase the water supply.
!To what extent can spills of crude, drilling fluids, human waste, or produced
water (water extracted in the course of operations and then re-injected for
disposal) be reduced or eliminated? Normal industry practice in the arctic is
"zero discharge" of such substances or of any other wastes at a drill site, and
disposal usually occurs via re-injection deep underground. However, spills
occur nonetheless. Re-injection of oil industry wastes are not subject to the
Resource Conservation and Recovery Act; rather, the Safe Drinking Water Act
(SDWA) regulates the underground injection of wastes. For injection wells
related to oil and gas operations, the SDWA authorizes EPA to delegate
primary regulatory authority to states that have relevant programs, provided the
programs protect drinking water sources and meet certain other requirements.
Alaska administers a regulatory program for oil and gas production wells and
requires permits for these wells.
!Several kinds of air pollution control permits would be required to explore and
develop ANWR, including state air emissions permits (issued by ADEC), and
new source review permits for Prevention of Significant Deterioration of air
quality (also issued by ADEC). Perhaps the biggest permitting challenge in air
emissions could involve prevention of significant deterioration³⁵ of its air quality
from emissions of nitrogen oxides, which would be emitted by natural gas flares
and by natural gas-fired generators to power development if oil were found.
Such requirements could be a major regulatory hurdle for plans to develop the
area unless Congress enacted waivers of these provisions.
!Whether oil is found or not, what provisions will be made for reclamation and
rehabilitation of the land following exploration or development? Under the
National Wildlife Refuge System Improvement Act (P.L. 105-57), new
activities are permitted on refuges to the extent that they are compatible with
the purposes for which the refuge was designated. Bills supporting oil
development have included a provision defining oil development as a compatible
use for the purposes of this law. FWS might condition development permits on
mitigation, reclamation or rehabilitation of affected lands. If no commercial
quantities of oil were found, cleanup needs might be fairly minimal. If oil is
found, and production and development occur, industrial activity would last
decades, and rehabilitation would be difficult and expensive. In either case,
rehabilitation is likely to be lengthy, because the slow growth rate of vegetation

³⁵ For more information, see CRS Report RL30853, Clean Air Act: A Summary of the Act
and Its Major Requirements.

in the arctic means that the most minimal disturbance can take decades to
recover.
Over all, a number of federal environmental laws could apply to oil or gas
development projects in ANWR. Those requirements, and additional ones, might also
be imposed as conditions of leasing permits. As noted in Environmental Permit
Streamlining, above, several current laws contain provisions that allow citizens to file
lawsuits challenging a project or activity for failure to comply with requirements of
laws or permits. Thus, while policy debate concerning the Refuge has focused on
effects on wilderness values and wildlife, it is conceivable that opponents could use the
environmental protection provisions discussed here as a mechanism for challenging
energy development in the area, unless Congress enacted waivers of these authorities.
Whether the existing pollution control requirements would meet the “best available
technology” and the “no significant adverse impact” recommendation of the NEPD
group would likely be debated by Congress, if it were to decide to open the Refuge,
but it is unclear whether or how Congress might modify their stringency or
“streamline” the processes by which they are implemented.³⁶
Bills have been introduced in the House and the Senate to open the Refuge to
development. Other bills would designate the area at issue as wilderness, thereby
providing additional obstacles to development. The high degree of controversy over
opening the Refuge for exploration and development hinders prospects for
development legislation.
Legislative Context
The majority of the NEPD report’s 105 recommendations involve administrative
actions, while 21 involve recommendations to the Congress for legislative action.
Most of the latter are broad and general – like the report as a whole – and the report
has not yet been followed by specific legislative proposals. Debate over energy
legislation has been underway in the Congress for some time, prior to the release of the
NEPD report, and both Republican and Democratic Members of the Senate have
introduced comprehensive proposals that differ significantly in their policy approaches.
Neither deals with streamlining issues or regulatory changes in broad terms, but as
noted above, the comprehensive Republican proposal includes provisions related to
ANWR and to licensing of hydropower projects.

³⁶For example, S. 388 would require federal agencies “to take such actions as are necessary
to establish and implement a competitive oil and gas leasing program that will result in an
environmentally sound program for the exploration, development, and production of the oil
and gas resources [in ANWR] and to administer the provisions of this title through
regulations, lease terms, conditions, restrictions, prohibitions, stipulations and other provisions
that ensure the oil and gas exploration, development, and production activities [in ANWR]
will result in no significant adverse effect on fish and wildlife, their habitat, subsistence
resources, and the environment, and shall require the application of the best commercially
available technology for oil and gas exploration, development, and production ...” (§305(a)
[emphasis added]). S. 388 does not waive any existing statutory pollution control
requirements. Another congressional approach to specifying environmental protection
responsibilities (for the Trans-Alaska Pipeline System) can be found at 30 U.S.C.A.
§185(h)(2).

The Republican proposal (S. 388, S. 389), introduced February 26, sets as its goal
reducing U.S. dependence on oil imports to less than 50% by 2011 and emphasizes
boosting production of conventional fuels. It proposes to lease ANWR with a portion
of bid bonuses earmarked toward funding research into renewable energy research and
development and a portion of royalties dedicated to land conservation. The use of coal
would be encouraged, with credits available for emissions reductions and efficiency
improvements. The legislation would require an improvement of 3 mpg in the fuel
efficiency of the federal motor vehicle fleet. Other provisions would provide support
for renewable fuels, alternative technologies, residential energy efficiencies, and new
nuclear reactor designs.
The Senate Democratic legislation (S. 596, S. 597), introduced March 22,
proposes to integrate energy and environmental policy to identify energy policy options
consistent with stabilizing greenhouse gas emissions. The Democratic proposal does
not embrace opening up ANWR, but it would establish incentives that would hasten
development of pipeline capacity to transport Alaskan natural gas. The Democratic
legislation also does not include an increase in automobile fuel economy standards, but
does propose to cap automobile and light truck fuel consumption in 2008 at no more
than 5% above consumption in 2000. (For more information see CRS Issue Brief
IB10080, Energy Policy, Setting the Stage for the Current Debate.)
In addition to these comprehensive proposals, bills dealing with a number of
individual energy policy and related environmental policy issues have been introduced
in the Senate and House. Some have been previously mentioned in this report: bills
addressing multi-pollutant air emissions and opening the Arctic National Wildlife
Refuge to development, for example. Among other individual topics already addressed
in legislation are developing clean coal technology, domestic oil and gas production,
alternative energy sources, electricity deregulation, motor vehicle fuels and fuel
economy standards, and expanding use of nuclear energy. It is unclear for now
whether Congress will choose to consider the range of energy policy issues individually
or comprehensively; the NEPD report does not appear to express a preference.
Conclusion
Energy problems and related issues do not lend themselves to fast or easy fixes.
Moreover, the focus of the debate in Congress is likely to be affected by recent
leadership changes in the Senate. Changes in committee leadership there are likely to
result in new or changed priorities. Many observers suggest, for example, that the
Administration’s proposals for oil and gas exploration in ANWR seem less likely to be
supported. Also, Administration support for multi-pollutant air quality legislation
enhances the visibility of that topic, but the issue of including carbon dioxide emissions
in such a bill, as some propose, is likely to be contentious. With many participants and
perspectives involved (including multiple congressional committees), a lengthy and
vigorous debate is expected over policies that will balance investment in energy
production, conservation, energy efficiency, environmental protection, and research
and development in alternative fuels and technologies.