Testimony of Kathleen A. McGinty, Secretary Department of Environmental Protection on the Governor’s Proposed 2006-07 General Fund Budget Before the Senate Appropriations Committee March 2, 2006 Chairman Wenger, Chairman Fumo and members of the Committee: I appreciate the opportunity to appear before you today to talk about Governor Edward G. Rendell’s 2006-07 budget request for the Department of Environmental Protection. When Governor Rendell took office three years ago, he declared that this Department of Environmental Protection would be an engine of economic growth. And indeed, DEP has been exactly that. We have led the effort to make Pennsylvania once again a national leader in energy. We have been instrumental in bringing hundreds of new jobs to communities across the commonwealth --- particularly in the advanced energy technology sector but also with companies that recycle and reuse materials that used to be thought of as waste. And, we have issued more permits at a quicker pace than ever before. Oil and gas drilling activity is at record levels due to high natural gas and crude oil prices. The energy industry responded to these market demands by re-visiting Pennsylvania’s oil and gas fields. DEP staff responded in kind --- working intensely to marshal a record number of permits without delay. DEP issued a record 6,046 oil and gas drilling permits last year, a 32.4 percent increase over the previous record of 4,567 permits in 2004. Our Northwest Regional Office alone set an all-time high of 333 drilling application in November 2005, the largest number of applications ever received by the department in any one-month period since the Oil and Gas Act of 1984. Pennsylvania also is experiencing extraordinary growth in the number of National Pollution Discharge Elimination System permits related to construction projects. DEP administers and enforces the federal water pollution-prevention statute and permit process within the commonwealth, ensuring development meets the highest environmental standards while residents enjoy the economic benefits these projects promise to bring. In just the last four months, our department has increased its rate of review by more than 50 percent to address a surge in applications. The number of NPDES permits issued by the department doubled from 1,325 in 2002 to more than 2,625 last year --- a sign that our economy is thriving and investors see Pennsylvania as an attractive place to do business. These environmental achievements help to stimulate the economy and create jobs. The state has cleaned up 2,194 contaminated and abandoned industrial sites since 1995, including more than 900 in the last three years, under Pennsylvania’s Land Recycling Program. These brownfield redevelopment projects have created or retained as many as 76,000 jobs, including 27,266 jobs since 2003. Governor Rendell is expanding these efforts. His Brownfield Action Team serves as a single-point-of-contact to streamline permitting for priority sites. BAT projects typically get permitted in half the usual time. This innovative measure accelerates redevelopment deals and gives investors the incentive they need to clean up contaminated sites and return them to productive use. Since being launched in 2004, BAT has assisted 33 projects in 20 counties. These projects will develop more than 4,500 acres of brownfields, creating and retaining as many as 35,000 jobs. DEP developed new guidelines that make it easier to meet state and federal environmental law guidelines when cleaning up former industrial sites. Streamlining the regulatory process keeps with the goal of protecting the environment while eliminating unnecessary bureaucracy that makes it more difficult to do business in Pennsylvania. New guidelines allow developers simultaneously to satisfy environmental obligations under the state’s Land Recycling Program and the federal Resource Conservation and Recovery Act. Previously, developers had to exert extra time and effort to comply with separate requirements under the state and federal standards. Waste of time, money and resources is in no one’s interest. DEP also created an innovative pilot program to reduce the time it takes to issue air plan approvals. Air plan approvals detail how facilities will control emissions to ensure compliance with state air quality regulations. The changes we are making will maintain the same degree of environmental protection and public involvement while removing unnecessary obstacles that in some cases cut in half the amount of time it takes to receive approvals. Energy represents another area where environmental protection is serving as an economic driver. We are extremely proud that the nation’s very first coal gasification-liquefaction plant is being built in Schuylkill County. Construction of Waste Management and Processors Inc.’s waste-coal-to-diesel plant will create as many as 1,000 jobs; operating the plant will produce another 600 permanent, high-paying positions. The plant will clean up tens of millions of tons of waste coal while giving us clean diesel at a fraction of the price we pay today. Not only do indigenous energy sources help us grow our economy, they also promise greater energy independence and a cleaner environment. With $219,908 in state aid, the East Coast’s first state-of-the-art biofuels injection facility opened last fall in Dauphin County. The plant will replace 3.2 million gallons of foreign oil with domestically produced biodiesel, and it will keep $6 million worth of energy dollars in Pennsylvania by reducing the state’s need to purchase imported fuels. Our commonwealth recently was recognized for its national energy leadership in working to put landfill gas to work for the economy. Granger Energy’s Lanchester Landfill project, which received a $235,000 state grant, supplies treated gas to several companies to use in place of natural gas in boilers and processes, displacing their reliance on natural gas. Putting this resource to use to power our economy gives us a clean, cheap energy supply that our businesses can use to keep jobs in Pennsylvania. Other landmark achievements position the Department of Environmental Protection to be even more effective in protecting public health and the environment in the years ahead. The Legislature’s support of Governor Rendell’s $625 million voter-approved Growing Greener II initiative --- the single largest environmental investments in Pennsylvania history --- provides funding to clean up rivers and streams, remediate mine lands, return abandoned industrial sites to productive use, and enhance the quality of life of residents in cities, towns and boroughs across the state. The effort enhances what already is an amazing success story: Since 1999, DEP has supplied $172 million in watershed grants for 1,497 projects in all 67 counties to create or restore wetlands, restore stream buffer zones, eliminate causes of nonpoint source pollution, plug oil and gas wells, reclaim abandoned mine lands, and restore aquatic life to streams that were lifeless due to acid mine drainage. Our number one water quality problem remains the highly acidic drainage that bursts from centuries-old abandoned mines or rains down on mountains of waste coal left behind by old mining operations. Where this once was seen only as a liability, new perspectives are taking hold. Waste coal is being put to use as an energy source. Mine pool discharges are turning microturbines to make clean electricity and power the systems needed to treat the water. Companies are putting residents to work by developing technology to use metals recovered from acid mine drainage in paints and coatings, cement-based products, plastics, paper and mulch. All of this has tremendous import for our commonwealth, where we have more abandoned mines than any other state in the nation. In the last year, DEP awarded 41 contracts worth $25.9 million to reclaim 968 acres of abandoned mine land in 18 counties. These projects will reclaim over 35,700 linear feet of dangerous highwalls, extend waterlines to replace water supplies degraded by mining, and construct treatment systems to improve our lakes and streams. Another way the environment is helping to drive our economy is through recycling. The state’s recycling and reuse industry includes more than 3,200 establishments with total annual sales of $18.4 billion. The industry employs more than 81,000 people and has an annual payroll of $2.9 billion. The industry has an indirect effect on the economy estimated at $1.8 billion, and a direct impact on the tax base, contributing $305 million each year. Continued success for this program is in jeopardy, however. The state’s recycling program is supported by a $2 tipping fee on each ton of waste deposited in Pennsylvania landfills. That fee runs only through 2008. This will be the last year for grants unless the legislature addresses this issue to ensure our commonwealth continues to enjoy the economic and environmental benefits of recycling. Today’s Department of Environmental Protection is a more efficient agency. We are doing more with less. Since 2003, we have reduced our complement by 4 percent while continuing to support the core programs that Pennsylvanians rely on daily to ensure their health and protect the environment. At the same time, the Governor’s $667.6 million request for DEP enables us to continue advancing innovative measures that encourage new investment. We also have reduced our fleet of sports utility vehicles by 20 percent, saving significantly in fuel costs. This follows in line with the Governor’s directive to replace conventional vehicles with hybrids so that by 2011, fully 25 percent of our fleet will be alternative-fuel hybrids, bringing sustained economic and environmental benefits to the commonwealth. As I noted earlier in my testimony, our department has responded in unprecedented fashion to a doubling in the number of NPDES permit applications. We have pooled staff and resources from every part of the state so we can continue our prompt and effective reviews. But additional staff and resources are critical. Substantial changes to the federal Clean Water Act mean the number of construction projects needing an NPDES permit will continue to rise. The Governor’s budget includes $330,000 to finance six new positions within DEP to help with engineering and technical reviews. Governor Rendell’s budget also includes $508,000 for underground mine safety and enhanced inspections through DEP’s Bureau of Mine Safety. What happened in West Virginia has affected all of us --- and it has drawn new attention on making sure every effort is taken to send our miners home safe and secure at the end of their shift. As this Committee is aware, the Hazardous Sites Cleanup Act (HSCA) Fund was on the brink of financial ruin last year until Governor Rendell secured passage of Growing Greener II. That initiative will provide $30 million for HSCA in the 2006-07 fiscal year, enabling critically important cleanup projects that were triaged to move forward. HSCA remains our most important tool to respond immediately and eliminate any threat to public health and safety. DEP’s budget is critically dependent on federal funds. Our department is watching very closely all of negotiations regarding the federal budget, which takes effect in October. President Bush has proposed reducing funding for the U.S. Environmental Protection Agency by nearly 5 percent, about $390 million. Unfortunately, this is the third year in a row that the majority of cuts were passed to the states. Make no mistake: cuts this severe at the federal level will have an impact on our work here in Pennsylvania. For example, President Bush’s budget would cut EPA’s Clean Water State Revolving Fund by nearly one-third, from $900 million to $680 million. This fund administers grants to states for clean water and other environmental improvements. For Pennsylvania, the fund has been a significant part of our water-quality improvement efforts for nearly two decades, contributing a major part of financing for water and wastewater treatment system upgrades. The president’s proposed budget also slashes the U.S. Army Corps of Engineer’s civil works program by 34 percent, from $7.4 billion to $5.8 billion. Pennsylvania already is feeling the effects of this reduction. Governor Rendell has had to invest $1.13 million in state funds to offset federal funding cuts for critical repairs to five flood control projects that were damaged by Hurricane Ivan in September 2004. The Corps did not have the money to fulfill its obligations here. Chairman Wenger, Chairman Fumo, members of the Committee: I thank you for your time and attention. I’d be happy to answer any questions you have at this time.
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