efforts to collaborate with other federal agents such as d.o.e.? >> i believe we collaborate very well with our sister agencies as well as our local communities. >> it's not what we're hearing and in some ways it reminds me of when i was in school and we had group projects and there would be one person who wouldn't do work. the teacher would ask how it went and everybody would put in a slip of paper saying this person didn't put in their weight and that person would stand up and say i did all of the work and everyone else is dumb. >> the studies that you're quoting didn't even do a study of this proposal. >> the studies i'm quoting are talking about the impact and that was released today and i don't know if you've seen it, but we can make sure we have it and this is the one that is dealing with the increase of your proposal. we'll make sure you have it and you can review it and you can respond later. it was released today and i haven't been holding it back from you. we would have gotten it to you

sooner. >> in the letter i submitted the national conference of mayors pointed out that the clean air act required federally-supported transportation activities are consistent with state air quality implementation plans and the largest rail hub in the country. according to the center of regulatory solutions freight traffic is expected to increase by 80% by 2020. how does epa expect the financially troubled state to implement these standards when the agency has not and will not consider the full potential cost of implementation? >> if i could just point out, sir, that the health standard sets up a process where states develop plans over time and there is significant time to achieve this standard but the majority -- >> my time has expired and if you can respond in writing back to these. >> the vast majority of the counties will be in the amendment as a result of national standards. that's an important thing to remember. this is not on the backs of the states. it is a partnership between the national government and the

states to get this done. >> the gentleman's time has expired and thank you, mr. holmgren. >> the gentleman from california is recognized. >> thank you, mr. chairman. administrator mccarthy, thank you for being here this morning. >> george brown former chairman of this committee whose portrait hangs right over there was partly responsible for the establishment of the epa and the passage of the act. my constituents and i have seen firsthand how the epa can advance public health. in my home district of riverside, california according to the state of the air 2015 a report from the american lung association still has tremendous struggles with o zone and particle pollution. we are situated downwind from my other colleague from california, and we typically have middle class and lower income folks who can't afford homes along the coast, and i'm glad to hear that my colleagues also care about poor people and middle class

people. i don't understand why they're not so concerned about the healthy people along the coast whose property stand in jeopardy by global climate change, but know, i'm struck by the fact that the epa regulations save us money in the long run by improving public health and a -- i'm struck by the comment that health is what you can pay for, but i'm also struck by a comment that a senior citizen once made to me and says nothing -- you can't place a value on your health. a study by the epa shows that by 2020 the benefits of the clean air act will outweigh the costs by 20 to 1. it has cut down on cases of asthma, heart disease and infant mortality and the by 2020 is expected to prevent 17 million lost work days because people are healthier, and i want to put this hearing in context. i'm afraid my colleagues on the

other side of the aisle are exploiting the public's frustration with the economic downturn to push an anti-environmental war on science. for me it's particularly offensive because the people in my area greatly suffered. we were ground zero for the mortgage crisis. it was a financial services meltdown which has caused this lack of participation in the economy, not regulations and we are proposed to solve our situation that was caused by a financial meltdown by deregulating our -- and not regulating the environment and taking these controls off which my area the people in my area benefit from the epa's regulations. the clean air and the o zone and the particularates we would suffer far greater, i claim if we did not have epa improving our air quality over the past 20 years.

administrator, do you believe that the epa -- what's the balance to elected politician ss versus independent scientists. >> when you make a decision like this you must listen to the independent science and base it on peer-reviewed science and that's what the law requires and it's what all of us agree would be a good thing to do. >> i think the american people would say let's trust the opinions of independent scientists. they're unelected granted, but they're also not subjected to the various different kinds of interests that complain about them, right? >> this body indicated that this is how they should do it. the congress set it up and the congress mandated that you rely on that. >> yes. >> i understand that the power plants burn coal, one of the serious emissions is mercury, is that right? >> that's right. and mercury causes -- is linked to neurological damage in

children. >> that's correct, and i understand who tends to be locate inhabit the areas around coal plants tend to be low-income people, often people of color. >> yes. >> is that true? >> that is true. okay. as much as -- i am glad to see the majority cares about the plight of poor people, but i wonder whether or not they care about the health of poor people? it seems to me that it's contradictory to say oh we care about poor people being able to buy carbon but not also take into consideration the fact that we have many, many many -- disproportionately poor people living around these power plants. i only have 20 seconds left, but can you comment about the ability of your regulations to generate gritter economic activity? >> yeah. it's actually a well-done rule

for the environment that's extremely supportive foundation of the growing economy because we're talking about premature deaths. >> we're talking about asthma attacks and kids not able to go to school and we're talking about families not being able to go to work, so we actually believe, and i think the data shows that our rules are so cost beneficial because they give so many more public health benefits than they do cost the economy, and if you struck thur right you generate activity in the economy to grow new technologies to grow new jobs and that's extremely important to remember is that the -- >> the gentleman's time has expired. >> i'm sorry. >> thank you mr. takano. the gentleman, mr. posey is recognized for his questions. >> thank you mr. chairman. administrator mccarthy, a 2004 department of environmental protection report claims from the florida department of environmental protection, due to the relatively large geographic

area covered by forest and other vegetation in the gulf area of florida, biogenic boc compounds emissions make up to 20 -- i'm sorry, up to 80 to 90% of the total vocs submitted on a it up cal summer day. >> thanks. >> another florida department of environmental protection report states epa also should consider whether natural background concentrations would preclude compliants with certain geographic areas and for example, epa estimates that 70% to 80% of the seasonal meanain o zone layers attribute to contribution. how can they comply with 65% to 07% if nature gives them 70% to 80% to start? >> congressman, let me show you

that states are not held responsible for reducing emissions that are not in their control. the clean air act is very clear about that so there was a great discussion, frankly -- >> all right. you say that's a fact. i'll accept that. >> okay. thank you. with regard to the clean power plan, are you at all concerned about the increasing cost of electricity and causing many, the poor which my colleague just referred to a moment ago and he seemed so concerned about, and also seniors to make difficult choices as to which necessity in life he could afford due to the increase in their electric bills and they could possibly be extreme. >> let me be clear. i am always concerned about the economic consequences of our rules and we seek very much to make sure that those are as minimal as possible, and if you take a look at the carbon

pollution plan and that's why we made it so flexible to make sure that electricity will be reliable and affordable. projections indicate that when this rule at the time of the final goal in 2030 the final standard, you're actually looking at a decrease at what people have to pay a month for electricity. >> how many people -- the citizen, how much can they expect the rates to go down because of the new rule that will pass? >> they can expect their bills to go down about 8% according to our projections. >> what about between now and 2030. at most, the increase is a gallon of milk. it's about $3. >> a month. a month. >> for what? that would be an electric bill, so if you pay $100 today it could be as much as $103 i believe in 2025 but over time that -- >> just before my time runs out. >> did i hear you say -- did i

hear this correctly, that of the 6,000 messages you received or sent on your government-issued blackberry and your government-issued iphone that only one or two of those were official business? did i hear that correctly? >> only one or two of those were actually records under the federal records act that should be preserved. now there were exchanges about i'm late for this meeting or that. those are transitory, and those are not to be preserved. that's how the federal records act works because they're not substantive. the two substantive ones that i knew about i preserved. >> out of 6,000 you only had two cub standive transmission out of 6,000. >> we highly discourage through policy the use of mobile devices for the very reason that we need to make sure that we're preserving records. so we highly discourage it, and

frankly, i do not use to my recollection, i only started using texts because my kids wouldn't answer my phone calls. >> did you receive or send any messages to any special interest groups interested in environment from your iphone or your blackberry out of 6,000 of them in five years, never once ever once, sent a substantive message or received a substantive message from a special interest group pertaining to the environment, is that correct? >> to my recollection, the two that needed to be preserved were preserved. >> just -- you can say yes or no. >> i don't -- that's my best answer. >> you cannot tell me that you never received any other substantive message or sent one. >> are we talking about text message? >> anything -- >> emails would have come in.

>> emails would have come in, but those are preserved. >> the gentleman's time has expired. >> i thank mr. posy and we'll go to the gentleman from california and mr. smallwell for his questions. >> thank you chairman and thank you administrator. did you want to follow up? >> i just wanted to indicate that the -- out of the two text messages that i preserved i think one was from an outside constituency and environmental advocacy organization. that's why i preserved it, but that's what i was trying to recall, but beyond that i didn't know if his question related to emails which is in the system and preserved. >> i didn't know what the question related to either. thank you. [ laughter ] administrator, in california, we don't really have the choice of having a debate about whether or not we believe that climate change is occurring.

we live with a climate that is drastically changing. we have the worst drought in our state's history. the good people of my district have put upon themselves drought restriction or drought conservation measures of up to 30% conservation and so i was hoping that you would elaborate on how extreme weather events are impacting states and the types of challenge state and local governments will face when dealing with more regular events. >> i'm happy, too, because the changes that we're already seeing in extreme weather in the united states include heavier downpours that are just getting more intense. heat waves are becoming more frequent and intense and intensity, frequency and duration of north atlantic hurricanes have increased since the early 1980s and winter storms have increased in frequency and intensity. we're talking about floods and have decreased in the southwest,

but they're really increasing in the north and east. we have droughts that we've not seen for the last 800 years that we're in so we are seeing already extreme results and we've recently put out a report that i would encourage you to take a look at that shows that if we don't take global action, what the world will look like that we're handing to our children in the next 50 and our grandchildren in the next hundred years. >> thank you, administrator, and i wanted to briefly touch upon renewable energy, and last september, the new york times featured germany with offshore wind and they will very shortly receive 30% of their energy from renewable sources and there are many other countries that are close behind but one of those countries that is not close behind is the united states. we're still around 10% to 12% from renewable sources and

that's largely -- that is not wind and solar and so would you agree, administrator that the best way to reduce carbon emissions would be to make investment, aside from policies but in the long run would be to make investments in renewable sources that provide energy. >> think the general public is speaking with their dollars on that because renewable is getting less expensive as time goes on and we're seeing in terms of renewables three times as much wind as prior to this administrations, ten times more solar. it's competing. i would absolutely agree that it is a technology of the future of the present on the future and energy efficiency is also a significant opportunity for the investment and if you don't demand the electricity and it's the carbon emitted from it. >> they deal with some of the biggest brains in the world across the great country. do you believe we're less

capable as a country than germany in achieving 30% of the energy from renewable energy? >> i think that's the president's frustration is that we have an opportunity to lead the future and that future would be better for us economically. we are growing more jobs in the solar sector than any sector of the economy. we can do better and the clean power plant will continue to spark that investment in innovation. >> thank you administrator and i want tothank my colleague from new york for letting me jump ahead of him and i yield back, mr. chair. >> i will go to the gentleman from kentucky and mr. massey for his questions. >> thank you mr. chairman. >> ms. mccarthy, i would like to start with questions and a discussion that you and i had when you were here in november of 2013. i asked if the epa was looking into regulating methane emissions from cattle, and i don't expect you to recall that, but i'll read to you the transcript of our conversation. i asked if you were aware that

methane emissions from cattle and can you ensure us itself that you are not investigating that and you said i am not looking at that and then i asked nobody in the epa said and you said not that i am aware of. we are talking about methane emissions from cattle and that was in november of 2013. now in march of 2014, just four months later the president issued a climate action plan called strategy to reduce methane emissions and targeting a number of industries for methane emissions reductions including agriculture and including cattle and then one month later april of 2014, this is five months after you and i had this discussion, and the epa put out a document talking about the sources and syncs of greenhouse gas emissions and there is an entire chapter in here dedicated to agricultural

emissions particularly cattle beef cattle and dairy cattle. >> if i were to ask this question today, would you have a different answer. the question is is anybody at the epa looking at or investigating methane emissions from cattle? >> sir, as you teed it up in this discussion you started by talking about are we regulating or considering regulating? i believe that was the context of my answer, and it remains exactly the same. no. >> you are not? >> no. >> and you can give us that assurance? you have no intention of regulating methane emissions. >> and the president is not suggesting that, either. what he is suggesting is it is a source of carbon emissions that lends itself very well to us working with agriculture to develop the technologies that reduce that, and epa has been engaged in that issue for a very long time. >> maybe like you were working with the boiler and wood stove industry.

>> we have been. >> exactly. i want to ask you about that. >> okay. >> you issued the final ruling on that in february i believe. do you think it's wrong or does it bother you at all if you promulgate a regulation that most americans are against? >> >>. >> if -- is -- if they get a chance to see it and understand it it would bother me very much. >> it bothers me, too, and the irony of you being here today or coincidence is that we'll have a vote about your regulation that you promulgated on wood-burning stoves and it's on the appropriations bill for your department, and i'm going to make a prediction. i'm going to predict that the people's house votes not to fund that regulation because a majority of our constituents don't support it, and i'm also going to predict it will be a bipartisan vote. >> well, sir i hope you take a look at it because we worked with the industry very well and it's about working with them to take advantage of new

technologies that will make it better for everybody. >> i've been talking to them, too, and do you know what it will cost to comply with their regulations? >> all we know is that we worked on a time line that was extensive for those small businesses. >> someone needed to know what it's going to cost because you published that. >> i just don't have it at my fingertips. >> it's $1 million dollar for models, what we're talking is a $50 million cost to this industry and these are small manufacturers making a product. by the way, are you aware that their product is eligible for a renewable energy tax credit? i find this very ironic because what they produce is a carbon-neutral source of heat for middle-income and low-income americans. the government provides a tax credit for yet you are adding $50 million at cost just for one type of these heaters. >> sir the emissions from wood

stoves is work that we have been working with states for a long time. >> and i would argue -- >> it is a source of emissions that don't need to be omitted if we work with the industry. >> if you're working with the states would you acknowledge that each state has different requirements and they're unique? >> which is why the industry in the states wanted epa to do a rule to smooth over the requirements specifically for the business of selling wood stoves. >> it is not happy about spending millions of dollars to upgrade their products because one size fits all top-down rule from the epa. i thank you, and i yield back. >> okay, thank you, mr. massey. and the gentleman from new york mr. tom ko is ridiculousecognized for his questions. >> thank you for your leadership. >> oh, there you are. i was looking for you. so sorry.

>> i don't know how i missed you, there's a lot of empty chairs. >> thank you for your leadership and your obvious grasp of the issues that is a tremendous benefit to epa. the hearing today is again, a revival of hearings we've held before and the proposals that strengthen standards to protect public health and the environment and claiming meeting these standards could be too costly and not achievable and a serious drag on our economy and it's for you, administrator. the clean air science advisory committee or ksac. the first report came out in the mid-1980s and there have been a number of subsequent reviews over the past 35 years with much new research since the original report. has ksac found that oz own zone was less of a risk than the science

determined it was? >> no, sir. they found it is of significant concern. >> does it contribute environmental problems for instance, damage to plants and visibility and other effects. >> no. we have not realized how much damage it actually causeses. >> so if anything, research over the years has confirmed that o zone is a health risk and an environmental problem. is that correct as a statement? >> yes. have past standards been criticized on the basis of their projected costs and benefits? >> always. >> i think your testimony points out that we have been able to achieve cleaner air and grow the economy as we have strengthened the standards, is that correct? >> that is correct. >> any reason to believe that we cannot keep that record going? >> none. they have the flexibility and discretion to determine how they might meet new standards in the most cost-effective way. >> that is exactly the choice we're giving them. yes. >> the climate change has the potential to exacerbate existing

health conditions such as asthma and adversely impact vulnerable populations like our children and our elderly. how do you respond to those that ignore the role climate change has on health? >> i ask them to trust the scientists. it is a majority an overwhelming majority and we need to take action now. >> thank you. i would hope that a committee dubbed science, space and technology would embrace science also. what kinds of ongoing health risks are expected if we do not act and current climate trends continue? >> well, if you look at a report that we put out we are talking about tremendous loss of lives, huge, economic consequences environmental damage if we do not take global action and u.s. leadership is essential to allowing the world to get the momentum they need to address this significant problem. >> and how were policies and the

administration is seeking to implement to address the public health impact associated with climate change. >> we're going to be reducing climate pollution which brings with it significant co-benefits and the significant opportunities to reduce other additional pollutants and the one thing that i think we always keep forgetting is that climate change is impacting the economy today. don't tell me it isn't in california. don't tell me it wasn't when hurricane sandy hit in new york. these are costs to us today that are only getting worse and worse, and if you look at action on climate and see the kind of economic benefits it can provide that will not just protect us from escalating carbon, but grow a carbon, a low-carbon future with new jobs. that is the goalpost that all of us are looking for and that's why we design the carbon pollution plan as flexibly as we did. >> thank you. i certainly, as a new yorker would associate with the comments you just made.

as a new yorker and someone who worked at the state energy authority i was working with medgie and the state department of environmental protection head dr. david cash said why is environmental protection and robust economic development can and should go hand in hand. would you comment on that statement? he indicated that they touted a 7% increase in economic growth in the region while cutting carbon emissions by 20%. >> it's been enormously successful. i think they recognize that if they challenge the utilities to be more efficient, if they provide opportunities for renewables and energy efficiency to be supported that it not only gets you the environmental benefits you're looking for, but it tremendously spots the economy. massachusetts having lived there, massachusetts actually bounced back better from the

economic downturn than other states and it was credited by the governor, that it was because of the new technology businesses, the way they have embraced the future that allowed them to have less of a downturn and bounced back quicker. so this has to be part of an economic strategy. you cannot have climate happen and not pay attention to the costs today and the escalating cost tomorrow and the tremendous benefits if you stand up tall and do what is our moral responsibility. >> the gentleman's time has expired. >> well, i thank you, mr. chair and i thank the administrator again for her awesome leadership. >> the gentleman from oklahoma, mr. stein is recognized for his questions. >> thank you, mr. chairman. i would like to start by showing a brief video clip here. >> i was recently criticized for actually doing a tremendous amount of outreach. that's the kind of criticism that i would really welcome.

it was very painful for me to read how successful we've been in getting people to comment on our rules. >> the tremendous outreach, administrator, mccarthy is one thing, but when you use this outreach intentionally to generate nearly 1 million positive comments on your waters of the u.s. rule and not only using that outreach from activist groups outside the organization but i have in front of me a newsletter from an epa manager and it looks like region five and it looks like epa a new social media application called thunder clap to provide a way for people to show their support for the agency's proposal? so now you're using social media tools to advocate for your agency's proposal and the thunder clap program is a social

media aggregator that includes facebook and twitter and a host of other social media tools and you're using your employees to advocate for your proposals and activating outside activist groups and then before the senate epw committee you testified that the epa's waters of the u.s. rule is justified because nearly 90% of the comments the epa received favored the proposed rule. so you're hijacking the process and you're using that data to justify the rule before the senate epa committee or epw committee. i'd like to ask you toior knowledge did epa engage in a legal analysis to determine whether using thunder clap in this manner violated the anti-lobbying act prior to engaging in that activity. >> there was no question in terms of the agency that we had done and were doing nothing that

constituted lobbying. it would be against the anti-lobbying act and it was well within the boundaries set by the federal government -- >> would you answer yes or no? did -- i'm asking you the question. did you get any legal analysis before using thunder clap and pressuring your employees to use thunder clap. look, i've got the newsletter here. >> -- an employee to use thunder clap. i'm unaware of that. >> if your agency is using a newsletter telling people to sign up for thunder clap and promote the agency's proposal, would that not be an ethical violation where you're using your employees to advocate for your proposed rule? >> let's dissect this if we could, sir. the question you pose to me was whether or not our use of social media was lobbying. it was not. it was education. it was outreach. it was getting people engaged. it was exactly what everyone tells us to do and it's part --

>> no. this is a different level because there is an email here from an employee that was very concerned about feeling that kind of pressure and that employee contacted the assistant deputy of ethics official and there is an agreement that this is a national concern and it says there is agreement that it is a problem. >> that's why i wanted to dissect this. >> the second question asked was about an employee who took that and actually copied it and shared it with others in the agency which was in fact inappropriate. >> it was an agency newsletter, was it not? >> not that i'm aware of. i don't know. he has been counselled. >> it says from the weekly dd news item. i would like to know what the weekly dd news item is and why it's coming from a regional director? >> it was a regional director who made a mistake. he was counselled.

i don't want you to get confused by epa's effort to engage people in the work that it's doing and get them active in considering how important clean water is. >> you do realize that your own regional judicial officer ethics official said that this is a problem. my next question for you is what are you doing about that problem? >> it is -- as far as i know he's been counselled to not do that. it should not have happened, but that has nothing to do with the fact that we use social media appropriately. >> one is a potential violation of law with the anti-lobbying act. i'm a navy pilot by trade. i currently serve in the oklahoma national guard. >> okay. >> i fought in the war in iraq in the beginning. imagine if president bush during the war in iraq said we need our department of defense employees to advocate for removing saddam hussein. how do you think that would respond -- we would feel

pressure as employees of the department of defense to do that. now this is something that your agency has been involved in. so the anti-lobbying act is of concern to me and we look forward to that and number two, put pressure on employees to promote the waters of the u.s. view and maybe that's not a violation of law but it is certainly a violation of ethics. >> i'm out of time. >> thank you, mr. brightenstein and the gentleman from texas mr. webber is recognized for his question. >> thank you, mr. chairman and ms. mccarthy, thank you for being here. >> thank you. >> a couple of questions. do you know what state has been the number one exporting state in the five to 15 years running in the country? >> no, sir. >> texas. do you know who has been the number one job-producing state, in many years producing more jobs than the other states combined. >> can i guess? texas. >> what do we have for her,

johnny? do you know who has the second largest environmental agency in the world. >> texas? >> you got it. tcq. >> serving on the texas legislature, i served on the environmental regulations committee. do you know of how good texas' economy is compared to the other what i call lesser 49 states? >> i do not know. >> it's way up there and finally, do you know what state has its own electric grid? >> texas does. >> you are almost batting a thousand. you're doing a good job. >> don't trick me and ask me a trick question. >> you don't want that. texas does really well and mr. chairman i have five articles here about the proposed rule i would like to submit to the record. >> without objection. >> mr. mccarthy, you made a statement before the energy and commerce committee that the clean power plan is quote not a pollution control strategy. end quote.

>> do you remember making that comment? >> when did i make that comment, sir? >> in front of the energy and commerce committee. >> i don't know in what context and it's a carbon pollution. >> and today it's been your testimony and your exchange with the congresswoman clark and also with congressman tomko here that we have a, quote moral obligation, end quote. >> at some point we said the epa was not empower by the legislation to consider cost and you said that today also. >> no, sir, not on the carbon pollutions. >> we actually have to consider cost. >> okay. >> so if you consider the cost and this has been the most costliest regulation in history and why is the epa imposing the regulations on the american people when you admitted to the energy and commerce committee it's really not about protecting

the environment? i don't know the context of that, sir but this is not one of our most significant cost rules. it actually is enormously beneficial. in 2008 then senatorm boo was running and he said, and i'm quoting, under my plan and it was a cap and trade system electricity rates will necessarily skyrocket. end quote, so the president is looking forward to driving up. do you remember that comment by the way? >> i've heard -- >> have you seen the youtube? >> i may have. >> okay. >> so you know that that was on his mind to drive electricity prices up. and by the way, that was in january 2008 in an interview by the san francisco chronicle. the chairman had the u.s. energy information do a study and they recently came out and said that that in fact under the clean

power plan electricity prices will be driven up. are you aware of that administrator? >> i am aware that there are studies that say that, yes. >> i'm talking about the energy information administration and you know they're bipartisan and they don't consider costs and they just look at the facts and they're not beholden to any government agency. is that a true fact? >> that they are independent. >> that's right. they were asked to do this. >> thank you for saying that and in their study, they said that a family of four could see thousands of dollars increase in their electricity prices. i'm an air-conditioning contractor, 34 years, and i am glad to hear that there are glad colleagues on the other side of the aisle that are glad we're looking out for poor people. i've been in many homes in 34 years where people could not afford air-conditioning repair and when their electricity goes up 5% 7%, 10% it hits them hard. so we look at this very closely. i'm extremely familiar with energy costs.

so when the energy information administration came out and said and other stake holder group, by the way, that the clean power plant and the other epa regulations will increase electricity prices for the american people and let me add, based on my experience of 34 years as an air-conditioning contractor and i've been watching it very carefully it will disproportionately impact low-income families. do you agree with that? we're working very hard to give the states the flexibility to not have that happen. >> have you been in the homes of low-income people when they had to spend money on an air conditioner that was inefficient? >> yes. >> it's kind of sad, isn't it? >> well, what we're hoping is that this will not only protect them and their public health -- >> let me move on. i'm running out of time. >> okay. >> in fact, i'm out of time. i'll yield. >> thank you mr. webber. >> too many texas questions. >> mr. johnson is recognized for

his questions. >> director mccarthy, thank you for being here today. i have a lot of ground to cover and i would like to i'm going to ask you some very specific questions. they're not the questions themselves are not very complex. the answers are pretty much yes or no answers. can we have an agreement that if i ask you something that you don't understand, ask me for clarification and i'll go back and clarify the question, but i want to move through these so we can get through them as many as we can is that okay with you? >> i'll do the best i can. >> okay. great. i want to go down the road of the independency. and we've heard the term independent science. we've heard that spoken several times today. according to news reports and including a new york times article the epa has a pretty cozy relationship with

third-party environmental groups such as the sierra club and the nrdc who are attempting to influence energy policy. given these stories and i'm sure you've seen some of them, is it epa policy to request that these third-party groups support the agency's position? >> i don't know of any agency policy. >> great. let's have slide number one come up. cording to this email obtained by the committee michael goo on writes to the nrdc saying that maybe a report to the nrdc showing no new coal plants are being built might be helpful to cover a draft epa rule on new power plants. are you surprised that the epa policy director? this is a pretty high position requested that the nrdc draft a report related to an epa rule. have you ever seen that before? >> no i haven't.

>> okay. so does it surprise you that the policy director would ask an outside group to do something like that? >> well, i -- i assume these had communication. >> would you take that and get back to us about how that conflicts with -- if it's not your policy and if it's not the epa's policy to do that. >> you asked me about a policy that asked people to do that. >> would you say based on this that the epa does indeed have a cozy relationship with these outside groups if the agency is asking them to write reports providing cover for an epa draft rule? >> all i know is that our rule making process is transparent, it's robust. >> it's not transparent because you're not getting comments from outside groups other than like the nrdc. so do you think it's appropriate that the nrdc is providing cover in their reports for proposed rules? >> i think it's appropriate that epa continue to do rule making

the way it does. >> i understand your job is to do rule making and the question is how transparent and how independent is it really? is this the only time that you are aware that an epa official has ever requested a third-party group write a report regarding an epa rule? have you ever had this happen before? >> i can't -- >> have you ever requested a report from a third-party group asking for a report while at the epa? >> i can't -- >> let's have slide number 2 come up, please. administrator mccarthy, it appears that epa policy director michael goo maintained a very close relationship with third-party groups even inviting employees from the league of conservation voters and nrdc to his house for an annual party known as the goofest. according to the invitation the party offered shots of copious amounts of food and alcohol included in the invitation is an apparent fake quote from president obama stating even better than killing bin laden.

i'm jealous. i don't have an obamafest. >> are you familiar with goo fest? >> i have never been to a goo fest. >> but are you familiar with it? >> i am -- >> would you agree that inviting the third-party groups from the approximately see director and the league of conservation voters and nrdc would you agree that that shows a close cozy relationship with these folks? and do you think it's appropriate for someone that's responsible for directing epa's policy to host a party that has attendees to influence the parties. >> i would agree that michael goo knows a lot of people -- >> no, do you agree it's appropriate? >> i have no reason to believe that this was about influencing rule making. >> oh, really? >> let's go to slide number 3. let's go to slide number 3. well, mr. chairman, i am so sad that we're out of time because i

had a lot more that i wanted to cover, but out of deference to my colleagues i'll yield back. >> thank you, mr. johnson. the gentleman from michigan is recognized for questions. >> thank you mr. chairman, and administrator mccarthy, thank you for being here. >> thank you. >> i wanted to ask you a bit about the waters of the u.s. rule rule. do you believe that it expands the epa's jurisdiction in this area? >> no, i do not, sir. >> you do not believe that? >> no. no, sir. >> do you feel that you will need additional funding to meet any new responsibilities based upon this rule? >> hopefully it provides clairity to reduce the level of effort on all parties including people that actually want to get work done and need a permit. its goal was to revise clarity

and save money as well as continue to protect the waters necessary for drinking water. >> and do you believe the rule was successful in inviting clarity? >> i -- i -- it certainly that was its intent and i believe it did, yes. >> i want to read you some quotes from someone who has 20 years' of experience in the field, and it's a gentleman who testified before our committee bob kurr of kurr environmental. and it falls well short of providing the clarity that the regulated community seeks. this rule will increase federal regulatory power over private property and lease litigation and permanent requirements for any business trying to comply. equally important, these changes will not significantly improve water quality because much of the rule improperly encompasses

water features that are already regulated at the state level. would you -- how would you respond to those comments? >> i would disagree with every one of them. >> okay. one reason i would quote to you, the other thing that is uncertain is how difficult it would be for me to secure permits for my clients. >> this rule is so convoluted that even professional consultants with decades of experience will struggle to determine what is jurisdictional. how do you respond to that statement? >> the reason we did this rule was because many in congress and outside stakeholders asked us to do the rule to provide clarity. i believe we did that. >> i understand because in your comments you make -- you mentioned your goal was to provide clarity. >> that's right. i'm trying to reconcile that with someone who has 20 years of experience as an advising businesses and people who are trying to comply with the law that is telling us that it does

not provide clarity and confusion. >> you would have to speak with him because this rule actually says what's in what's out and boundaries to where you need to look. those things have not been clear for 15 or more years. in the area of -- i wanted to ask you about ditches. >> yes. you've made a point that ditches is not jurisdictional in the final waters of the u.s. rule. is that correct? >> no. i have made it very clear that we have -- that we are only including ditches that act as tributaries that are important to protect and we have added specific exclusions to make it clear that ditches that only run once in a while and that are only there for irrigation purposes and all of those issues that we maintain all of those exclusions and we've added some for clarity purposes to try to

get the ditch issue off the table. >> and so if farmer or a business or local government believes their ditch is exempt do they have to ask for an exemption or can they consider that they have an exemption? >> yeah. it is exempt. the other thing we did is to more carefully and more narrowly craft what is a tributary so that anyone could clearly look at it and make those determinations and so that it would limit the amount of time of the core and it would provide certainty to the farmers. >> so if someone believes they are except they are except and they will not have a ruling from the epa that counters that. the only reason you would ever come to the federal government is if you want to pollute or destroy a wetland or water body that you think may be jurisdictional. that's when they come and ask, but -- >> can we interrupt you for a

second because we're low on time? >> yes. >> we think we think it may be jurisdictional. when you say we? an individual who wants to destroy or pollute water. >> if an individual doesn't believe it is >> they don't call us. >> and you would not be any way have recourse on them because they didn't call and ask if it was jurisdictional? >> what we tried to do here is make it as clear as possible so that farmers and those in agriculture doesn't actually know and feel comfortable is absolutely all right. >> and if you disagreed you would not have recourse on them? >> i don't -- we've tried to make it -- >> gentleman's time has expired. thank the gentleman. the gentleman from california, mr. knight is recognized for his questions. >> thanks, mr. chairman. thank you administrator mccarthy. i want to go on a couple lines but one i want to follow-up with a recent discussion. if we go back to our farmers and

we say that if you look at these ditches and you believe you are not polluting these waterways these temporary waterways, these ditches, you are okay and there's no reason why the federal government should come on your property and check these ditches out? >> we have done nothing other than to hopefully provide clarity on what constitutes a tributary and what does not. >> okay. okay. i'm going to move onto california since all of my texas folks are yelling and screaming about their state. i will talk about california a little bit. in a recent article there was some discussion. i'm going to read very quickly just a couple lines. indeed in some localities especially in the western states the new standards are approaching background levels of ozone, in other words the level that occurs due to factors beyond local control. while epa claims that they're exceptional events exclusion is

responsive to the concern, many states believe epa's tools to address these concerns are limited and inadequate. these concerns are spread throughout the u.s. they're not limited to specific geographic regions. in california we know that we have an awful lot of background, or other things that happen to our state that we really don't have any control of countries and different things that happen to our ozone. by this statement in this article is that a true statement? are we -- is the exclusionary rule for states like california are we getting our bang for the buck on that? >> yeah. i think they're referring to what we call exceptional events which is to take into recognition that things happen that are out of states' controls. so we have recently done one just maybe a few years ago that clarifyied dust issues. you know, all of the ways in

which you can have dust storms arise. and that seems to have resolved a lot of issues. we also know there are issues with wildfires that we have to address. that is actually going to be a rule making that we're moving forward with so that it doesn't interfere with the state's ability to be able to make attainment. so we're really trying hard. >> okay. >> there are other tools we can use as well. >> i'll follow up on another article that i'd like to be put into the record, mr. chair, it's from the san joaquin air pollution district. and we have many control districts, air pollution, air quality management districts in california that are very restrictive, very difficult our south coast and san joaquin are two very difficult ones because of all of the mitigating factors and the background that happens to these too. but it was brought up from the san joaquin that pending standards for ozone and

standards for pn 2.5 require different deadlines and different attainments. and their solution or their worries is that sometimes when they get new regulations or new attainments that the old ones do not fall off. and that they have to continue to make those reports and those kinds of standards. is that something that we can correct at the epa? >> well, we're really trying to make two things happen. one is to enhance the state's ability to do multipollutant plans so that they don't do separately pm and ozone but think about them together so that a similar strategy can be available for both. but we also take a look at how we can more effectively and quickly deal with redesignation so those that have achieved the standards have an ability to not be captured in constant sip world, state implementation plan world. it is challenging because we know that we don't want the states to stop doing things they

were obligated to do that got that achievement there but it's hard to keep that and then move forward with continuous improvement. >> i would ask that if you could allow the states to be able to get these attainments by working on a standard that works for their state, and maybe letting them work with their districts, whether it be california air resources board or whoever in the other 49 states. it might be helpful. and secondly if we can make it so that they understand what they're doing every year and they don't have to continually look back and continually do the things that maybe have been required of them in years passed, that would make it a lot more helpful. >> i assure you we'll do the best we can. i know how hard they work and how much they care about the same things you and i do. >> thank you, administrator, for coming in. and i yield back the balance of my time. >> gentleman yields back.

gentleman from texas is recognized for five minutes. >> thank you mr. chairman. mrs. mccarthy, i would like to put something up on the screen to show a picture. this is houston texas which i have in my district part of shows that twice a day traffic for commuters for 2 million people in the city of houston. twice a day. under your regulations and the clean air act for traffic conformity, we would not be able to expand or add new lanes since most of my district including harris county, which we're looking at here is not in attainment under the current standards much less under the new proposed rules. i would ask you, do you think this is a good idea when houston, texas, is one of the fastest growing cities and areas in the entire country? we cannot add any lanes to these

thoroughfares here. >> i was looking for myself in that picture. i've been stuck there before. >> i have too. >> we work very hard when there are construction issues that arise, new lanes that need to be added, to work through the traffic conformity issues. it is not a carte blanche ban on doing new roadways. >> so you're saying that the city of houston the county of harris would be able to add lanes? >> just because you're in attainment does not mean we can't move forward. just means we have to work together to make that happen. >> i got ya. i'm going to remember that. i'm going to tell the folks back home we can add lanes. >> well. >> let me tell you how many jobs are at stake with this new regulation chrks will regulation, which will cost the american people, as we've heard today, but i'd like to say it again $140 billion every year with a b. epa's new proposed regulations would cost my home state of

texas $286 billion, this is over the next 20 years 23 years, up to 2040. $286 billion in gross state product losses. it will cost us $347347,322 lost jobs per year. $1430 drop in average household consumption per year. and $39 billion with a b, for my constituents in texas to operate their vehicles in those 23 years as well. this will be one of the most costly regulations ever issued in history for the american public and especially for my home state of texas. i have one of the most highly industrialized districts in the country. if one of my constituents loses their job because of this regulation, what would you say to him or her? because these folks are needing

to provide jobs -- needing their jobs to provide for their families. and how can you justify this? give me a short answer, please. >> well, sir, i don't know what numbers you're looking at. >> these numbers came from the national association of manufacturers. >> these are the exact -- they might as well have recycled them from the last time we did an ozone stapd ardndard. and it wasn't true then -- >> why are all these stakeholders thousands of them, saying they can't come into compliance. if they're going to have to shut their plants down. this is going to cause them to layoff employees. as we heard mr. weebweber say, we provided jobs over the country for the -- >> we follow appropriate economic -- >> this will eliminate all of that. >> we have appropriate economic impact work, it's available to

you. i think one of the things no one seems to recognize is that the vast majority of counties across the united states are actually going to be in an attainment with the new standard that's revised by 2025 just because of what we're doing at the national level. >> mrs. mccarthy i beg to differ. i have a map that shows immediately we'll be out of attainment. in fact it's so severe that even yellowstone national park will be out of attainment immediately because of the new ozone regulations that you're proposing. >> i'm happy to take a look at it, sir, if you want to provide it to me. >> i hope you will. i yield back the balance of my time, mr. chairman. >> the gentleman yields back. and just to clarify states and localities can lose transportation funds from the department of transportation for new roads and bridges if an area is in nonattainment. that directly effects my good friend from texas, mr. babin's district as well as my own district in oklahoma.

>> can, but -- >> i now recognize the gentleman from alabama, mr. palmer for five minutes. >> thank you mr. chairman. administrator mccarthy from the epa your agency wrote that the epa projections show the vast majority of u.s. counties would meet proposed standards by 2025 just with the rules and programs in place right now. is that correct? >> that is correct. >> then is it also correct that the epa is just now -- or just earlier this year started releasing guidelines for implementing the 2008 rule? >> that is actually true sir, yes. >> then why in the world are we talking about a new standard, which the epa based on a past hearing here admitted the technology doesn't exist to meet this new standard. why have -- are you implementing a new standard when you haven't

implemented the last one? >> well, sir, there are still remaining a number of standards. this is actually an -- >> ma'am i don't want to get -- >> well, congress told us to do this, sir. it is an effort to continue to look at the science. >> so if congress -- you're doing it because congress told you to do it? that's a yes or no? >> yes, but for more reasons than that. yes, that is my obligation. >> your authorization is from congress, is that correct? >> it is. >> so if congress tells you not to do it, you wouldn't do it? >> i did not say that. >> you said you had the authorization from congress to do it. >> i'm implementing your laws. >> so if we change the law you won't do it thank you. i would like to talk about the impact on low income families. i grew up dirt poor. so i get this. i just like to point out, and you're probably aware of it, but i imagine most people aren't, that the national black chamber of commerce has come out strongly against this. let me read you what they said. the epa regulations -- and if

they will put up slide number one please, they say epa regulations will increase his hispanic property and black population by more than 23%. this provides energy burdens on black and hispanic households who are disproportionately low income. the next one shows losses median household incomes. again, disproportionate impact on black and hispanic households. put up the next slide please. this shows the projected job losses. okay. for black families by 2025 we're talk job losses. by 2035 7 million. among hispanics 3.8 million by 2025. by 2035 we're talking 12 million. if you put up the next slide this shows the increase in the poverty rate for black households and hispanic households. again, reading from the national

black chamber of commerce rorlt the epa regulations will increase hispanic poverty by more than 26% and black poverty by more than 23%. ma'am, i don't know how you justified this because it does create an enormous economic burden. it's having an enormous impact on jobs. the economic policy institute which is a left leaning group, they basically are labors think tank points out that 29% of the unemployed -- the current unemployed have been out of work for 27 weeks or more. ma'am, that's over six months. we're looking at a report from gallup that shows prior to 2008 there were approximately 100,000 more businesses starting up than closing. since 2008 we're now seeing 70,000 more businesses close than start up.

and the united states now in terms of how we rank with other industrialized nations in terms of entrepreneurship, job creation, we don't rank first, second, third we rank 12th. and i want a quote from an article from "usa today" that in trying to explain these two in their words terrifying trends the death of so many businesses and the dearth of new ones say there are numerous factors but one is the obviously america's ever growing -- i've sat here listening to you basically deny there's an economic impact. you even asserted there's going to be an economic benefit. we've had numerous hearings on the ozone rule the clean power plan and there's been several people testified that this is all just to provide health benefit. but here's a study and mr. chairman, i'd like to submit all of these for the record if i

may? >> without objection so ordered. >> here's an article in the american journal of public health that makes the point that the single biggest predictor of in terms of respiratory health is income. and obviously i think you would agree, wouldn't you, that income is directly related to job status, would you agree with that? >> it sounds right. >> thank you, madame. >> mr. chairman, i yield the balance of my time. >> the gentleman yields back. the gentleman from georgia is recognized for five minutes. >> thank you mr. chairman and mrs. mccarthy thank you for being here. we're near the end. we're the low guys on the totem pole. just in the short time i've been here we've asked numerous times for documents from your department and your office and continually as mentioned earlier rarely get those. but i was informed as we were walking in that coincidentally we did receive a bunch of

documents just before your testimony here today. and you actually mentioned in one of your responses that you have produced 15,000 documents to the committee. if we could bring up slide one. we appreciate that. but what i have right here is an illustration of just one page of 2,000 of these pages of document which issin incoherent garble. it makes no sense. i want to bring this to your attention. this is 2,000 pages of the 15,000 just like this. either this is insulting that there's no respect for this committee, we're just going to send them documents or it's a political statement. let's shut these guys up and move on. but i'll move on from that now. i do want to talk about economic impact. regulations that have an impact on the american economy greater than $100 million are deemed economically significant. an executive order 12-8-66

imposed in 1993 by the clinton administration requires agencies conduct a regulatory impact analysis in which cost and benefits of economically significant rules are analyzed as well as an analysis of potentially effective and reasonably feasible alternatives for these rules. now, yes or no administrator mccarthy, when the epa sent the proposed waters of the united states rule to the office of management and budget for review in 2013, did the omb deem the rule to be economically significant? meaning that it would have an economic impact of greater than hundreds of millions of dollars yes or no? >> i don't know the answer to that, sir. but give me a second and i can look it up. >> okay. it's something as big as the waters of the u.s. we're unaware whether it would have an economic impact of over $100 million. it seems that should be something we would know right away. >> actually, sir, the challenge for us is that it has no direct impact on the economy.

the costs come in when it's actually being implemented. >> so did the omb -- >> this is a rule that determines jurisdiction. it's not a rule that requires action. >> did the omb determine whether it was economically significant when you first requested it? >> i don't know, sir. i'll have to get back to you. >> okay. if the epa -- well if the omb had indeed determined it was economic significant, would the epa conducted a regulatory impact analysis? which is required. >> yes. >> yes, you would have. can we bring up slide number one? i'd like to show you a series of e-mails produced to the committee by epa regarding proposed waters of the united states rule and classification by the omb as being economically significant. and this slide this e-mail, the office of general counsel lawyer and acting deputy director of the office of water dave evans discuss omb's determination that

the waters of the united states rule is economically significant significant. david evans writes, economic assessment identified indirect costs that are well above $100 million a year. i think epa has claimed the indirect effects of a definitional rule should not be used to trigger the monetary threshold identifying economically significant policy actions. jim at the omb seems to have decided otherwise so it's clear the omb initially had determined that it is well above $100 million impact. so is it the epa's belief that if a rule has indirect economic impacts of $100 million or more it should not be deemed economically significant? >> you should not be surprised that we often have back and forth with omb. i would not consider that to be a determinative -- >> okay. if we could go to the next slide. in this e-mail the epa office of water employee jim pendergras writes, nancy stoner and kim

kapakis, know that a regulatory impact analysis may be negs necessary. but there are some economically significant rules from epa that haven't had an ria, which is required according to the executive order we cited earlier. but stating here there are some economically significant rules from epa that haven't had an r.i.a. they are checking with the office of policy to see if there was some agreement at the political level that we don't have to conduct an r.i.a., an r.i.a. that is required by law. the response to this e-mail states good news. tamika and candy talked to ken and ken has agreed we do not need an r.i.a. let's leave it at that. so there was a political decision made that you don't need to do what law says you have to do. so this e-mail appears to show epa made a political decision not to conduct a formal --

>> sir that may be the way you're reading it -- >> -- proposed waters of the united states -- who made that decision? who made the political decision you don't have to follow what the law says -- >> we'll have to get that for the record. the gentleman's time has expired. >> i would like to submit all the documents i have for the record. >> without objection so ordered. >> thank you, mr. chairman. >> you bet. the gentleman from louisiana, mr. abraham, is recognized for five minutes. >> thank you mr. chairman. i thank you mrs. mccarthy for being here. mr. chairman, i would also like to submit a letter that 22 health care professionals have signed that would argue against epa stance on the health benefits of these decreased ozone layers. if you would admit that i would appreciate. >> without objection so ordered. >> mrs. mccarthy i am a physician and a scientist. and i would appreciate any raw data you could give me because i can interpret them and i can certainly make my own decisions as to the raw data that some of

our colleagues on the other side of the aisle said we weren't probably, i guess, able to interpret. but i assure you i can. so if you would get that to me i'd appreciate it. >> actually, we've provided the data that the chair requested. and it's available to you already. >> i'll look at that. now, the other thing, mrs. johnson, the ranking member in her opening statement, referenced the integrity of the epa. and i just want to make a comment on that. as you are probably aware that last week there was an article that came out that said your senior counsel for air and radiation, who you referenced in this hearing, was given by the centers of american progress a far left organization some talking points for journalists when he was trying to move a position so to speak. so, again as a physician, as a

scientist that looks at raw data and makes decisions, i'm troubled to say the least when one of your people who i'm sure are quite capable of coming up with their own opinions are being influenced by those on one side or the other. now, saying that you also have referenced increased tornadoes, hurricanes. i'm from louisiana and i assure you we know hurricanes. but it also last week i think it was a nobel winning physicist who used to be on president obama's team of environmentalists came out and said that president obama is dead wrong on this global warming. and these are his words. these are not mine. so, again, if you can give me objective data where we certainly have seen increased tornadoes and hurricanes in the last five years, i would be

happy to receive them. and let's go back to asthma. again, do you have reference as a physician, as a scientist, i do read a lot of ep dimology journals and prior to this hearing i referenced the american journal of epidemiology, and what i was looking at looking at your testimony and what the epa is wanting to tout was that well if we got increased ozone if we don't reduce these ozone layers then we're going to have an increased incidence of asthma and upper respiratory conditions. let me just state that beijing china, one of the filthiest cities in the world i'm told as far as air quality, has a prevalence of lifetime asthma of only 2.2%. california is 13.8%. and these are despite decreased ozone layers in the united states. now, i have treated thousands of

cases of asthma in louisiana delta myself. and we have some pretty clean air down there. we're in the farming community. and i understand the american lung association has kind of got on the bandwagon for the epa as to saying well increased ozone layers are numbers could contribute. could. anything could. but if you look at the objective data you have to take into consider petdss, dust, dust mites, pollen count these types of things. so i guess the question to you is, do you know what percentage increase in asthma there has been over the last few decades? i've got a slide if you want to put it up there. and if you look atted the slide mrs. mccarthy you see asthma incidence has dramatically increased despite decreasing ozone. so i guess i would ask for your

comment on that. >> well, i don't think that the scientists at this point are saying that asthma is caused by ozone. >> no. >> the issue is that it's exacerbated. >> objective data cannot prove that. and again -- >> no -- >> -- i can talk to any scientist you want and give me objective data but give me some good points to argue here. i've got a chart here that begs to differ. >> it exacerbates the impacts of asthma because -- >> but you can say that mrs. mccarthy, but you've got to prove that in the scientific community. and these numbers just don't add up. and that's my point. i don't mind looking at good numbers, but i'm looking at an asthma increase with decreased ozone levels. we know they decreased since the cleaner air of -- >> we have not made -- the scientists for us have not made a connection between levels of ozone and the prevalence of asthma. it exacerbates the impact because it makes it more

difficult -- >> you can say that. but you cannot prove that. again -- >> the gentleman's time is expired. >> thank you mr. chairman. >> so what we're going to do now is move into a second round of questioning. we have a vote on the floor of the house right now. it's a single vote. so i'm going to chair the hearing here for the second round. and i'll be replaced here in a few minutes when one of my colleagues comes back after having voted. so moving into the second round mrs. mccarthy a couple of things i would like given some of the comments we've heard so far. it is true that cities municipalities states they can lose their department of transportation funds if they're not in compliance with the epa. that is absolutely true do you agree with that? >> they can. >> they can. and what that means is that if they can, that means they're being bullied. this is federal bullying. and that is exactly what my constituents in the state of oklahoma are absolutely -- they

are abhorred by this kind of federal bullying saying you're going to lose your department of transportation funds if you don't comply with what an unelected, you know, government bureaucrat tells you to do. they're abhorred by that. you can argue, but they're abhorred by that. >> that is not a rule making. that's in the law. and it's never ever happened. >> and as far as -- >> mr. chairman -- >> the gentle lady is recognized. >> i'm the only person on this side and i have to vote. can you recess long enough for us to vote? >> we're going to keep rolling because we've all got other places to be. so we're just going to keep moving through. >> the vote supersedes and the vote says we can recess for vote? >> what's that? we have plenty of time. we'll get there. so i'm going to reclaim my time moving forward. as far as the economic impact, people say this is somehow going

to grow the economy, these rules and regulations grow the economy. this is not been historical precedent. it's not the fact. my question for you, mrs. mccar think thi, in november 2014 you had an op-ed stating the clean air act requires epa to update air quality standards every five years. i want to repeat that. requires the epa to update air quality standards every five years. however, in your testimony today you state that the clean air act calls for the epa to review the standards. do you acknowledge there's a difference between update and review? >> no. i mean you update it on the basis of science. >> so when you review it -- >> stay at exactly the same level -- >> when you review it and do a cost benefit analysis and come to a determination, can you keep the standards the same? >> absolutely. >> so you don't have to update the standards, you can review them and -- >> you need to have them updated by current science. it could result in exactly the

same standard. >> so when you're doing your advocacy, some of us are concerned you're using different language than the language you use to testify here. so when you did your op-ed in cnn money and said you have to update the standards, that's different than review the standards which is required by law every five years. >> if you see it that way, sir, i'll be more careful. >> thank you for that. we have heard testimony before this committee that your agency's proposed ozone knox rule will be the most expensive in american history. when can we expect the epa to withdraw its proposed ozone acts rule since economic costs were not properly taken into account and properly prioritized when formulating the rule? >> we will be moving ahead to finalize the rule no later than october 1st of this year by a court order. >> so are you suggesting that you're not going to withdraw the proposed ozone rule? >> i am not now intending to

withdraw the rule. >> has the cost benefit analysis been properly taken into account? >> we believe properly done our regulatory impact analysis yes. >> okay. i think it's clear that we'll have to start over from the beginning given the supreme court's ruling. with that i'm going to go vote. but i would recognize the ranking member. she has departed so i will recognize mr. johnson for five minutes. >> thank you mr. chairman. and director mccarthy -- or administrator mccarthy thank you for being here. when we ended with the last round, you assured me that you had never been -- never attended a goo fest. are you familiar with the goo fest? >> i'll be very honest with you i got the very last invitation. the one that you just showed i think was -- >> yeah. >> one and only one i ever

received and i did not respond. >> would you agree though that the epa director of policy -- i mean, this is the person that directs the development of policy having a personal, private relationship, a social relationship at a thing called goo fest shows that the epa critical members of the epa has a close relationship with these outside third party organizations, right? >> sir, i don't think -- >> is there any denying of that? >> i do not think that people are precluded from having friends in every walk of life. >> i don't think so either. but these are people influencing policy. we've already established, miss administrator, that you've asked this group to do policy papers for the epa. and now you've got the epa policy director in social settings with these folks. let's go on. let's go for slide three. >> but there are ethics

policies -- >> let's go for slide three. in another e-mail madame administrator from sittenfeld currently senior vice president for government affairs at legal conservation, voters, i'm going to show you more evidence that demonstrates this inappropriate relationship. >> okay. >> he thanked mr. goo for inviting her to goo fest writing as always i had a great time. according to the white house visitor logs, she's visited the white house on 71 different occasions. administrator mccarthy, how many times have you been to the white house? >> a lot. >> a lot. more than 71 times? >> i don't know. i doubt it. >> you don't know. >> i doubt it. >> well she's been 71 times. are you surprised? >> she's older than i am. >> oh well could be. i don't know. that'd be good for both of us, i think. are you surprised that mrs.

settenfeld has visited the white house 71 time sns. >> i don't even know the woman. >> but you know the position she holds because i just told you that. she is the vice president for government affairs at the league of conservation voters. would you say that environmental groups have a close relationship with the white house and if the senior vice president for government affairs at the league of conservation voters has visited there 100 times, close to 100 times or 71 times. >> i really do not know. that is a very big organization. >> okay. all right. well, let's go to slide number four. according to news reports and e-mails obtained by the committee, mr. goo -- back to the director of policy, apparently attempted to skirt transparency. you talked about how transparent your rule making process is. tried to skirt transparency and his ties to environmental groups by arranging meetings with the

nrdc at the starbucks in the jw marriott hotel in pennsylvania avenue close to the epa in an effort to prevent participants from the meeting from signing in at the epa building and creating public records. is it appropriate in your opinion for an epa employee particularly the director of policy to schedule meetings with outside groups attempting to influence the agency's policy decisions at a starbucks instead of inside of the epa? >> sir i do not know anything about what was being attempted. >> okay. all right. somewhere along the line, madame administrator, the buck stops here, you know? >> yep. >> why do you think mr. goo, the epa policy director set up a meeting at starbucks instead of the agency? any idea? >> i would not want to guess. >> well i think the american people madame administrator, want to know what it says about the epa's relationship with

outside groups if agency officials set up private meetings at coffee shops instead of at their office. i think the american people are very concerned about the cozy relationship between the epa and these outside advocacy groups. and i want to say one more thing while i've got just another minute or so. i've heard repeated this morning, and you've even echoed it, how other countries around the world have made much more progress in reducing carbon emissions and becoming greener with investments in renewables. i just came from a visit to europe and i would encourage you to talk to some of our european friends. you might be shocked to find out some of our european friends are actually increasing their mix of coal in their energy profiles. and when we ask them why they're doing that because you know they've got a big carbon emission reduction to do by 2030

as well, i asked the president of the energy union, i said how are you going to accomplish this? and why are you going to a higher mix of coal? he said our rate payers our businesses and our residential customers, have reached the tipping point. they're no longer willing to pay these exorbitantly high prices in energy costs. it's making us non-competitive in the world's economy. madame administrator, that's what your agency is doing to our country by not considering the economic implications of the rules that you make. the supreme court has just ruled that it's unreasonable for the epa to take that position. so i would remind you of that. and with that mr. chairman, i'll yield back. >> i thank the gentleman for yielding. we have a number of members that have more questions to ask in representation of their districts. so with that we will stand in

recess subject to the call of the chair. >> the committee on science, space and technology will reconvene. thank you for the short recess so some of our members could vote. at this time the chair recognizes mr. palmer. >> thank you mr. chairman. administrator mccarthy, i think you've made a point that cost was not a major consideration at one point in your testimony. do you not think that considering the link between

income and health that costs and the number of jobs that we lost and the preponderance of the evidence that we're losing jobs and companies because of overregulations. do you not think we should take into consideration cost? thank you. >> i believe that jobs and the economy are tremendously important and need to be considered. i want to just make sure we understand each other. i said in the development of an ozone standard the law and it's been told to us by the courts procluds us from looking at cost as a health based standard. that does not mean we do not look at cost in the implementation phase. >> i realize in the recent supreme court decision involving the mercury rule that those are different statutes. but at the same time though i think the point made in the supreme court decision that it's

unreasonable to apply regulations without taking into consideration the cost and the economic impact should be relevant to the discussion we're having about ozone, about clean power plan about the waters of the u.s. >> just a quick note, you can watch the rest of this hearing with epa administrator gina mccarthy on our website c-span.org. we'll leave the last few minutes as chair of the house financial services subcommittee hosting a round table on liquidity concerns on the fixed income markets joined by regulators with the s.e.c. and commodities future trading commission. live coverage from the library of congress here on c-span3. -- financial services. first of all, i want to welcome our distinguished panel today and thank them personally for coming and sharing, i think some very important subject that if you've picked up a paper lately or watched the news or

seen a speech or heard a speech, this is a very timely subject. and so i appreciate our panelists participating in that. also thank our guests for coming. i think you're in for a real treat. a lot of folks said well, why don't you have a hearing? and i said, well we don't want to have a hearing. we want to have a discussion. and this is a panel discussion. and really i'm going to get to do the very same thing that you're doing, those of you in the audience and those watching on c-span, is get to hear these folks have a very important dialogue about a very important subject. one of the things other than the fact that it seems to be out in the news and topic for discussion people said why have a panel. and one of the things that came to my mind was we focused a lot about what's going on with the individual entities out there as the markets have changed, market structures change, regulatory structures change.

there have been a lot of changes to the entities themselves. but i think one of the things we think is important is also to determine what kind of changes are going on in the marketplace because ultimate lyly that's important to every american citizen because in some way or the other these markets touch america in a lot of different ways ways, whether we're buying houses, buying cars, financing a business, whatever. so these financial markets are extremely important. and so one of the things i think is important that we all do is that we have an ongoing dialogue about, you know, what are going on in the marketplace. and today obviously we're going to talk about what's going on in the fixed income space, particularly as it relates to liquidity. i was going to quote chairman bernanke. he kind of summed it up i think, what we're talking about

today. says anybody done a comprehensive analysis of the impact of all of these changes we've seen and he says i can't pretend that anybody really has. you know it's very complicated. we really don't necessarily have the kwaunquantityive rules to do that. so i think it's really important for us to have a discussion. so we're going to have that discussion. and you're in for treat because we have a set of a really great panel. to kick us off our panel today is s.e.c. commissioner dan gallagher. as many of you know commissioner gallagher has worked at the s.e.c. several capacities throughout his professional career. he was on the front line of the agency's response to the financial crisis. and since returning to the agency as commissioner mr. gallagher is focused on issue strengthening our capital markets and has been an outspoken advocate for increasing the commission's focus on fixed income markets. commissioner gallagher. >> thank you very much mr.

chairman. it's a real honor to be here. it is a little nicer than testifying, i must confess. not that i don't want to do that. but no time soon, please. first i have to say is you well expect my views are my own and don't reflect those necessarily of the commission much to your chagrin, mr. chairman. but i think this is a hugely important subject. it's a hugely important time to talk about it. three years ago i gave a speech about fixed income markets both muni and corporate markets talking about data with respect to retail in some of those markets, some concerns we were hearing about liquidity at the time. and really putting out a call to action for the commission to spend more time thinking about the structure of the fixed income markets, the lack of transparency, especially in the corporate debt markets. i joke i've been using lately is since michael lewis came out

with his flash boys book last year we've been spending a lot of time thinking about high frequency trading. and i like to say if we're going to prioritize based on michael lewis books, i'd like to go back to liars poker because fixed income markets are largely the same as they were in 1989, i think we have some unfinished business there to attend to. and it's easy for us to ignore these markets because generally speaking they've been operating very well for 30 years. there's been a bull market. and in this current interest rate environment u.s. corporations have hit the debt markets with much success in the last several years. it's been great for markets allowing them to grow and expand and hire. that's a good thing, but that's of course because of monetary policy. we have to get used to an environment and prepare for an environment in which that incentive is no longer in place. and we have to worry about the potential for liquidity crisis in the event that interest rates rise and we don't have the inventories that we used to, we don't have the buyers to be on

the other side of the sell transactions. so i'm hoping and expecting that the commission will continue to spend more time on these issues. we've traditionally not spent our resources our staff resources looking at these issues. and we only get good policymaking when we resource our staff thinking in these issues. right now we still only have one-half of one full-time employee thinking about these issues. that's no good. we need to up our game in that space. and i hope to continue calling for that as i depart as a commissioner. i know my friend and colleague will continue as he has done over two years to call for the same. but i appreciate your effort in bringing some light on these issues and look forward to taking part in the panel. >> thank you. next i'm pleased to introduce ftc commissioner sharon bowing, sworn-in commissioner in june of 2014 for a five-year term and important to our discussion here

today sponsor of ctfc committee has the purpose of providing the commission with market intelligence and recommendations from the industry about market risk and restructure issues. commissioner, please. >> good afternoon. it's a pleasure to be here today to talk about a subject that i think is fascinating in finance that topic is about liquidity. i of more than $400 trillion in futures and swaps. let me preface my regards by also stating that my comments are my own. i do not reflect the viewpoints of my fellow commissioner or ctfc staff. now, you may be asking why am i here on a panel discussing fixed income liquidity when the cftc does not regulate fixed income securities. well, the short answer is the line between the markets are breaking down and increasingly interconnected. what effects the futures markets

effects the equities markets. what happens in the bond market doesn't stay in the bond market. and the swaps market is intimately connected to pretty much everything that happens in every other market. and given the global nature of our financial markets and the challenge of harmonizing our rules and regulations across borders, i'm even more mindful of the need to address the issues of liquidity through an even broader lens. as for the longer answer, the truth is the cftc does regulate income securities, we are the prime regulator for swaps based on underlying fixed income securities. according to a joint cftc-s.e.c. rule making of 2012 that defined the word swap and as many of you know that was not easy, certain products are dually registered by both. i hear a great deal about liquidity for market participants including concerns we have insufficient liquidity

in our markets. the cftc's market risk advisory committee on which i sponsor devoted half our meeting last month to discussing this subject. one of the major takeaways from that meeting for me was that before we can do anything to address liquidity we first need to find a way to craft a generally accepted definition of liquidity. at the very least we need to make sure that market participants define what they mean by liquidity before they start talking about how it is growing or shrinking. at present liquidity is basically in the eye of the beholder. some people view the concept drastically differently from others, even in the ab instruct. let alone we're talking about liquidity in specific markets. we need to define liquidity and then develop that measure changes in liquidity if we hope to enhance or protect liquidity in our markets. additionally it became clear to me during my meeting that we regulators need to further engage with the industry and

other stakeholders in our discussions regarding liquidity. to that end i'm happy to be here today. and i look forward to hearing the prospectives of my fellow panelists. >> thank you commissioner. now, next, nilly lang is the director of the office financial stability policy in research at the federal reserve board. she's responsible for conducting and coordinating work at the board relating to the analyzing emerging and structural risk to the financial stability and developing a macro credential policies to mitigate systemic risk. dr. lang. >> thank you very much. appreciate the invitation to participate. this is an interesting topic for discussion. i will start by saying these are my own views and not those of the federal reserve board. i'm going to start with a little definition of market liquidities. we've expressed it. so market participates have been expressing quite a bit of concern about reduce bond market liquidity, which we have interpreted to be they are not able to buy or sell securities

in reasonable quantities at relatively low cost without materially effecting market prices. so at the federal reserve we've been listening to these concerns. and we've been monitoring a wide range of liquidity indicators, though no single measure appears able to capture the multiple dimensions of liquidity. many available measures including bid as spreads, market depth, price impact trading volumes do not indicate a notable deterioration in market functioning although we have seen a decline in average trade size. but there have been some recent events including the flash rally and treasury markets on october 15th 2014, which suggests it's important to continue to evaluate the resilience of liquidity in cash and future markets to stress events. there are a number of possible reasons for why market liquidity may have changed, which are related to demand and the provision of liquidity. there are fewer active trading

participants sdp and an increase in buy and hold investors which may reduce the demand for day in day services. at the same time broker dealers may be less willing to buy and sell bonds at the request of their clients because of new regulatory requirements or changes to risk management practices they have made on their own. technological changes may also be effecting the provision of liquidity, increased reporting requirements for corporate bond transactions have reduced trading costs, but may also have reduced trading sizes. in treasury markets greater algorithm and higher frequency trading may be leading to fundamental changes and may also reduce the profits that dealers can earn by providing liquidity. the interagency staff report on the u.s. treasury market on october 15th which was released just this morning, highlights that on typical days principle trading firms that employ proprietary automated trading

strategies account for more than half the transactions in the treasury securities markets and traditional broker dealers account for about one-third of the transactions. some degree of liquidity risk will always be present in capital markets financing. in terms of whether current perceptions of create liquidity risk are unnecessary cost to the economy, a key issue is which sectors of the financial system are bearing that risk. looking back to the fall of 2008, which was the greatest market ill liquidity event in recent times due to fears of fire sales from deleveraging, the liquidity risk was held by the highly leveraged financial sector, the banks and broker dealers. with hindsight the regulatory structure for this sector was inadequate and much has been done to increase the strength and resilience of the core of the financial system. more recently liquidity risks appear to have shifted towards less leveraged entities such as mutual funds.

in principle financial stability is enhanced when risks shift from firms that are more levered to firms that are less levered and have more stable funding. if these less levered entities are sufficiently prepared for bearing greater liquidity risk, the financial system and the economy may be better off with these changes. in summary credit from bond markets has been very strong in recent years and is supported by stable, more stable and less complex funding than before the crisis. to maintain robust credit markets, it is important that investors maintain confidence that they can transact officially in these capital markets. in our view while most of the kwaun quantitative to date markets if you thinking quite effectively we will continue to track changes in market liquidity. thank you. >> thank you. next panelist is sandy o'connor,

she's held several key executive positions at jpmorgan. ms. o'connor. >> thank you to all of you sharing a bit of time this afternoon to discuss this important issue. why does it matter? well, it matters because in our country market based lending through the corporate bond issuance funds about 50% of the growth of american businesses with direct lending from banks making up the rest. our financial market as you are well aware have long been a competitive advantage for our country. with benefits for businesses of all types and sizes and the people who work for them and the economy as a whole. so too it provides appropriate support for consumers who are seeking mortgages, auto financing, card financing and things of that nature. our capital markets and the strength of them and their

durability have led to the u.s. economy recovering more quickly than those in europe. and in fact european union is looking -- the european union is looking to put in place a capital markets initiative to reduce their reliance and concentration on direct bank lending. so again, much like dr. lang has said, as we discuss liquidity, i think it's very important to define what we mean. and having traded fixed income products myself and as former treasurer of jmmorgan, trade when i want to and the size i want to and with reasonably predictable pricing. it is under that definition that i think we can agree that general market liquidity has in fact been declining and we have hit some air pockets as market depth has been tested. as already noted the 2013 taper tantrum, the treasury flash rally on october 15th and the recent euro tantrum. all of this has been during

relatively benign times. and in the most liquid markets in the world which is what gives us pause. these are the last places that you would expect the level of pricing volatility or for example a six sigma move on treasury pricing we saw on october 15th. markets have not yet been tested under more severe circumstances. and therefore it's important for us to contemplate because we don't know whether liquidity or the depth of liquidity as it presents currently will be an issue or not. but it does need to be carefully considered. it is important to note that markets, the financial industry and the economy are all in transition right now. and as a result there are multiple drivers of this change in liquidity. and again some already have been mentioned but just to reemphasize, market structure has in fact adjusted. it's different today than it had been. there's an increased reliance on algorithmic and hft trading don't hold a high level of

capital and therefore don't hold high levels of inventory. and in fact as part of normal market practice as volatility increases the depth typically declines and pricing widens out. additionally the share of fixed income instruments owned by mutual funds and etfs has grown significantly. and central banks are playing an increased role as market participants as part of their role in quantitative easing and implementing monetary policy. market participants have changed their business behavior. banks have went back to the more sophisticated risk management and control frameworks which have resulted in a lower risk appetite. investor decision making has become more homogeneous as become central to an investment thesis. and finally regulatory changes clearly have contributed to lower dealer liquidity. for example, capital and liquidity rules have increased the cost of holding and financing dealer inventory with

the leverage ratio weighing heaviest on the highest quality, most liquid assets like treasuries and high grade corporates. liquidity rules have required banks to hold high quality hold high quality liquid assets for their own purposes. and post trade disclosure requirements are reducing banks appetite for underwriting large trades for customers. new regulations, both domestically and internationally have led banks to rethink which businesses they are in and which they will stay in in that price. this is an appropriate and intended consequence of regulation. markets and economy suffers when multiple rules attempt to reduce the same risk. increasing regulatory costs or rules may mischaracterize a risk. looking forward market depth is on course for further decline. upcoming regulations are proposed and implemented.

these will include the fundamental review of the trading book and the feds propose surcharges as an example. furthermore, the supply of secondary liquidity declines the demand may in fact increase with changes in monetary policy and the reversal of quantitative easing. i think it's very important as we sit and look forward, given the new base that we are at. capitol is nearly two times the level it had been at. we had more than a trillion more since 2011, our focus needs to be on resilience and resilience being define ed as the safety and soundness of the banking institutions as well as the resilience of the capital markets. >> next, we have managing director at black wrong.

he's previously work eded with the jpmorgan team. >> it's my pleasure to attend on behalf of black rock and i look forward to the discussion. most fixed markets have adapted to changes intended to have safety and soundness of the global financial system. looking back, the conditions leading into the 2008 crisis were healthy and more sustainable. participants need to accept the changes occurred post crisis. in many cases, intentionally due to regulation. black rock has been considering these issues and has been adapting for several years by making changes in our creating platform capabilities portfolio methods and risk management. bond markets are changing as a result of a number of different

factors. central banks have been employing extraordinary measures for an extended period of time. bond issue answer has increased as issuers take advantage of historically low rates. at the same time, deleveraging across the financial systems ongoing and broker dealers have been markedly reduced. broker dealers continue to make ma ets and fixed income, however, the market making activities are more constrained than they were before. the result is, the number of bonds outstanding is significantly outpaced increases in trading volumes. therefore, reducing lower available secondary liquidity. primary assurance on the other hand has remained strong and an increase in the size of average issuance. in contrast secondary markets have been thinner post crisis. in particular, there's more pricing impact for larger trans, as in the secondary market.

we view the shift as an actual evolution. policy has created conditions including low levels of volatility which continue to change. we should expect an increase in volatility going-forward. further, some policy makers have raised concerns regarding the impact of rising rates given the current environment. we believe there is a need to separate concerns about market losses by investors, versus systemic risk. the environment will likely lead to gains by some investors and losses by others. this reflects a properly functioning market. losses experienced by investors are not the same as systemic risk nor does this continuous pricing mean that systemic risks will arise.

the market and market participants need to adjust to inning chas and find a new equilibrium. the issue of liquidity is not new, and there are many ways that market participants can adapt. in part, this requires open mindedness and a willingness to change behavior investors like ourselves need to update their technology tools and practices, banks and broker dealers need to accept greater adoption of agency like structures and fixed income markets compared to the traditional over the counter market structure. issuers need to think through the cycle beyond today's accommodative environment. regulators play an important role in their ability to require market participants to change behavior. we also recommend that all market participants and regulators invest in and embrace new solutions. based on the challenges facing

market participants and the concerns raised by policy makers, black rock has outlined several recommendations to move the market forward using a three-pronged approach. one, a focus on market structure modernization. two enhanced disclosure and regulation of a -- the fund level using a tool kit, and three, evolution of new and existing products that are taking advantage of market technologies. >> our next panelist is dan leland, he joined the southwest securities in 1995 as the executive vice president working with responsible for the capital markets division. he's a former vice chairman of the business committee national associations associations. mr. leland? >> for the old timers around nasd is now funra.

i'm head of capital markets for south west securities in dallas. i wabnt to thank you for putting this roundtable together. it's a full service securities firm based in dallas, and i'd like to say we're a regional firm and probably more main street than we are wall street. regional firms typically are involved in in new issuance for men use pal debt, when it comes to the taxable side of the arena, they're not involved in the new issue and trade in the secondary market. that will give us a little different perspective on the market and liquidity than some of the larger markets that are around. it's easy to see that the enstyer marketplace is concerned about the conditions in the fixed income markets, that is important, and i'm glad to be here to offer southwest securities on the markets. regulation and contribute to discussion. a couple topics i want to make sure we hit. finra markup rules the u.s.

fixed income market is a volatile marketplace. the risk dealers accept liquidity for aaa is vastly different. funeral markup rules are explicitly designed to account for changes in volatility and risk. the enforcement of the markup rules does not reflect the real risks of providing liquidity. market transparency rules should be optimized, hedge those positions, and then provide liquidity in smaller trade sizes to retail investors. current trace reporting would better balance the benefits of transparency versus the benefits of dealers being able to provide liquidity. retail investors would be able to repair pricing of same day

priced trades and would benefit from the liquidity and less volatility. finra and msrb matched trade proposals. the riskless principle is designed to provide confirmation which is on the confirmation disclosures on retail sized trades on the same principle trades. the purpose of the rule is to inform the retail investor about the dealer compensation. however, the proposeals do not exclude earn vesters from the rule proposal, it may apply to institutional accounts. there are no riskless trades that bring inventory on the balance sheet. before a basal three, which affects us more so that we've been bought by a holding company.

the requirement that we -- i think with those two individuals already exiting and the additional expense of transacting business in that market, you can see other participants exit and cause less liquidity. there's a lot of topics to go over and i know my perspective is going to be from a regional platform and more granular than some of the other perspectives you'll hear here today. >> thank you. our next panelist is kathleen yo joined ge capital in 1990. she manages the largest private sector issuers and contributes to the fixed income investor relations efforts.