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Hearing Of The House Committee On Homeland Security - The Chemical Facility Antiterrorism Act Of 2009


Hearing Of The House Committee On Homeland Security - The Chemical Facility Antiterrorism Act Of 2009

Chaired By: Representative Bennie Thompson

Witnesses: Sue Armstrong, Director, Infrastructure Security Compliance Division, Office Of Infrastructure Protection, Department Of Homeland Security; Philip Reitinger, Deputy Under Secretary, National Protection And Programs Directorate, Department Of Homeland Security; Pault Baldauf, Assistant Director, Radiation Protection And Release Prevention, New Jersey Department Of Environmental Protection, Marty Durbin, VIce President, Federal Affairs, American Chemistry Council; Dr. Neal Langerman, Principle Scientist And CEO, Advanced Chemical Saftey INC; Martin Jeppeson, Director Of Regulatory Affairs, California Ammonia Company

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REP. THOMPSON: The Committee on Homeland Security will come to order. The committee is meeting today to receive testimony on H.R. 2868, the Chemical Facility Antiterrorism Act of 2009.

At the outset, let me indicate that we've been told that the air is out in all of Cannon, so I would assume that means the testimony we receive today will not include hot air -- (laughter) -- but only the truth. And we've been told that the maintenance personnel are working on it, so shedding coats and other things would absolutely be in order if the need arises.

Otherwise, good morning. When I assumed the chairmanship of this committee, I identified the needs to shield the nation's critical infrastructure from foreign and domestic terrorism as one of the many key goals in charting the course toward freedom of fear.

To that end, reauthorization of the Department of Homeland Security's chemical security program -- the Chemical Facilities Antiterrorism Standards program -- before it expires on October 2009 is a major priority. Yesterday, I was pleased to introduce H.R. 2868, which not only reauthorizes CFATS, but also enhances it in a number of critical ways.

H.R. 2868, the Chemical Facility Antiterrorism Act of 2009, is the product of over six months of stakeholder meetings and bipartisan discussions between the Committees on Homeland Security and Energy and Commerce. In the end, we have produced a bill that is both comprehensive and common sense. I have made no secret of my disappointment that past efforts to enhance chemical security legislation has been bogged down between and because of jurisdictional conflicts.

This Congress, I have a partner that shares my commitment to enacting comprehensive chemical security legislation this year, Henry Waxman, the chairman of Energy and Commerce Committee.

At our direction, over the past six months, committee staff worked in an open and bipartisan manner and sought input from a wide range of experts and stakeholders, including the Department of Homeland Security, large and small chemical manufacturers, fertilizer manufacturers, petroleum and propane manufacturers and distributors, the explosives industry, key associations in the chemical sector, the State of New Jersey -- and I really wish Mr. Pascrell was here to hear that -- representatives from labor unions that represent chemical facility workers, drinking water and wastewater organizations, academic and other experts.

Today's hearing will continue in that open and collaborative spirit. While, at introduction, the bill does not yet have a Republican cosponsor, I am hopeful that in the end it will garner bipartisan support just as similar committee-developed legislation has received. After all, many of the key provisions that were accepted during the negotiations were offered by Republican staff.

Today, in addition to discussing the new legislation, we will also be discussing how things are going with the implementation of CFATS. As a close observer, I give credit to the department for the good job it has done so far in promulgating and enforcing the CFATS regulations. There have been a few missteps, but the department has adapted quickly and made adjustments as necessary. The legislation we will discuss today represents a continuation of that effort.

As the CFTAS program has been implemented, it is evident that there are a number of areas that need to be addressed legislatively. These include: the current exemption on security regulations for drinking water, wastewater, and port facilities, the absence of strong whistleblower protection, restrictions on citizen suits, and absence of a requirement that facilities include methods to reduce consequences of terror attacks, a best practice in the chemical sector in their vulnerability assessments.

The introduced version of H.R. 2868, together with forthcoming provisions that the Energy and Commerce Committee plans include, will take each of these issues on directly.

I look forward to hearing from our witnesses today as we move forward with reauthorizing and enhancing the CFATS program. Thank you.

I now recognize the ranking member of the full committee, the gentleman from New York, Mr. King, for an opening statement.

REP. PETER T. KING (R-NY): Thank you very much, Mr. Chairman, and like you, I look forward to the testimony today. I must say at the outset, though, that I do have very real concerns about going forward with this legislation. We adopted very comprehensive legislation back in 2006. Mr. Lungren was in the forefront of the negotiations and discussions where we forged out very real and workable and meaningful compromises.

And as the chairman said in his opening statement, the department has made real progress. And my understanding is that the President and the Administration and the Department itself are asking that the legislation be extended for one year, that we not have a rush to judgment, that we not have a rush to revise the bill or change it, but to give the department one year to fully comply with and to implement the legislation which was passed in 2006.

Rand Beers, when he was testifying before the Senate, the President's nominee for under secretary, he also requested that a one- year extension be granted. And my understanding is that the Homeland Security Appropriations bill, which will be on the floor tomorrow or Friday, is actually calling for -- has included in it a one-year extension.

So we have the Appropriations bill going forward with a one-year extension, and yet, we are attempting to revise the bill, and again, if I could say -- that shows -- I mean, part of the weakness in not having an authorization bill -- because we have the Appropriations Subcommittee on Homeland Security moving ahead and setting policy, and we're coming in afterwards and we're setting different policy. And that, I think, shows the inherent weakness in the multiplicity of jurisdictional committees in this entire issue of homeland security.

So I have real concerns, and I see no purpose why we are rushing forward today against the wishes of the president, against the wishes of the department, and against the wishes of the Appropriations Committee. Now, other issues I have -- I have real concerns about the whole issue of the third party suits, and I'd be interested in the testimony from the department as to how they feel about that, having citizens bringing lawsuits, offer legislation.

And again, the overall concern I have is that in many ways we are giving the environmental lobby too much of an in here. This is a homeland security issue. It's not environmental. Obviously, there's environmental concerns, but the prime concern here should be homeland security, security, keeping Americans safe, saving the lives of Americans. And we get into the whole issue of inherently safer technology, and I recall what some anguished -- listened to the debates between Mr. Lungren, Mr. Markey in 2006 over inherently safer technology. I thought the compromise we worked out at that time made sense, because without over simplifying it, inherently safer technology is a concept.

And I just think it is dangerous for us to be rushing the gun, coming in a year before the department wants to have all its regulations in place and its policies in place and imposing a concept of security rather than actual science, rather than precise methodology.

So again, I look forward to the testimony.

Mr. Chairman, I have to say I have real concerns about the direction in which we're going, and I think -- I'm wondering how much of this is almost wasted effort in view of what the Appropriations Committee is going to be doing on the House floor this week and what I assume the Senate will be doing, and we'll be really -- we'll be coming in too late with legislation which serves no real purpose.

So having said all that, I still look forward to hearing, and I thank the chairman for his courtesy, and I yield back the balance of my time.

REP. THOMPSON: Thank you very much. I'm happy to see my ranking member supports my President. And I look forward to further opportunities --

REP. KING: (Inaudible.) (Laughs.)

REP. THOMPSON: -- to do that. Obviously, there are points of disagreement. That's why we're here. Other members of the committee are reminded that under the committee rules opening statements may be submitted for the record.

I welcome our first panel of witnesses. Our first witness is Mr. Philip Reitinger. Mr. Reitinger is deputy under secretary and currently acting under secretary for the National Protection and Programs Directorate at DHS. Prior to joining DHS, Mr. Reitinger served as a chief infrastructure strategist at Microsoft.

Our second witness is Ms. Sue Armstrong. Ms. Armstrong serves as the director of the Infrastructure Security Compliance Division within the Office of Infrastructure Protection at DHS. She is responsible for development and implementation of existing CFATS regulations.

Without objection, the witnesses' full statements will be inserted the record. Mr. Reitinger and Ms. Armstrong provided one joint testimony. I now recognize Mr. Reitinger to summarize their joint statement for five minutes.

MR. REITINGER: Thank you, Chairman Thompson, Ranking Member King, and distinguished members of the committee. It is indeed an honor to appear before you today to address the department's authority over high-risk chemical facilities through the Chemical Facility Antiterrorism Standards, or CFATS program, and to discuss the department's views on its reauthorization.

As the committee is aware, Section 550 of the fiscal year 2007 Department of Homeland Security Appropriations Act directed the department to develop and implement a regulatory framework to address the high level of security risks posed by certain chemical facilities. Consequently, the department published the CFATS Interim Final Rule on April 9, 2007. Specifically, Section 500-A of the act authorized the department to adopt rules requiring high-risk chemical facilities to complete security vulnerability assessments, or SVAs, develop site security plans, or SSPs, and implement protective security measures necessary to meet risk-based performance standards established by the department.

Section 550, however, expressly exempted from these rules certain facilities regulated under other federal statutes. For example, Section 550 exempts facilities regulated by the United States Coast Guard pursuant to the Marine Transportation Security Act, drinking water and waste water treatment facilities regulated under Section 1401 of the Safe Drinking Water Act, and Section 212 of the Federal Water Pollution Control Act respectively are similarly exempted, as are some other facilities.

Since the publication of the Interim Final Rule in April 2007, the department has made significant progress in implementing the CFATS program. I'd like to highlight some of this progress. We have reviewed over 36,500 top screen consequence assessment questionnaires. In June 2008, we notified 7,010 preliminarily geared facilities of the department's initial high-risk determination and of the facility's requirement to submit SVAs. We received and are reviewing over 6,100 SVAs. We recently began to notify facilities of their final high-risk determination, tiering assignments, and requirements to complete and submit SSPs or alternative security programs.

Per Section 550, the CFATS program is scheduled to expire in October 2009. The President's FY 2010 budget request would extend the authorization for a period of one year to October 2010 to allow time for Congress and the Administration to develop an appropriate reauthorization bill.

To this end, we have enjoyed a constructive dialogue with Congress, particularly this committee, as it works on new authorizing legislation for CFATS. We urge that in authorizing continued implementation of this important program Congress provide adequate time and resources to implement any new requirements under the legislation. We are in the process of reviewing the most recent -- current reauthorization bill. In general, we support some aspects of the bill, but do have concerns with other sections of the bill, particularly the provision relating to citizen suits.

We look forward to our continued collaboration with the committee to ensure that chemical sector security regulatory effort achieve success in reducing risk in the chemical sector and protects the public. In addition to our federal government partners, success is dependent upon continued cooperation with industry and state and local government partners as we move towards a more secure future.

I'm accompanied today by Sue Armstrong, who leads the CFTAS program at DHS. Sue has been involved in this program since it was first established and can assist in answering the members' questions regarding its implementation.

Thank you for the opportunity to appear today, and Sue and I are happy to answer any questions the committee may have.

REP. THOMPSON: I thank you for your testimony. I remind each member that he or she will have five minutes to question the panel.

I now recognize myself for the first question. Getting right to it, in your statement you noted that the department's request for a one-year extension of CFATS -- you followed that by saying that you look forward to working with Congress to extend the program permanently.

So is it fair to characterize the one-year extension proposal as a backstop to ensure that CFATS isn't interrupted if Congress is unable to complete its work before October 2009 when the program is scheduled to sunset?

MR. REITINGER: Thank you, sir. I would say that the proposal for a one-year extension is so that we would have time to work on an appropriate reauthorization of the bill. Obviously, we believe this is a critical program that needs to continue, and we would like to work with the committee to have the most effective reauthorization possible. A one-year extension would give us the time to move forward and achieve the best possible authorization bill, and that was why it was requested in the President's budget.

Thank you, sir.

REP. THOMPSON: So where are you along the way if this bill that we're considering now becomes law?

MR. REITINGER: If the question, sir, relates to where are we on implementation of the CFATS regime --

REP. THOMPSON: That's correct.

MR. REITINGER: We are substantially into the implementation of the regime. As my testimony indicated, we have issued an Interim Final Rule. The appropriate tox screens have been submitted, and we are now in the process of identifying facilities on a rolling basis of where they are tiered with a recent notification to roughly 140 facilities that they are within the top tier or tier one.

As a result of that, they will be required to issue or to provide to DHS site security plans within 120 days. We'll continue to do those notifications, review them, approve them, or engage in discussions with the regulated facilities, and move forward on implementation throughout all of the tiers and begin the inspections process, which will be the next step during the next fiscal year.

REP. THOMPSON: So if the bill passes before the sunset occurs, what interruption do you see occurring?

MR. REITINGER: Sir, if the bill were passed before the reauthorization, I think there would be no interruption in the actual regime, however we would like the opportunity to continue to work with the committee to make sure that the reauthorization is as effective as possible.

REP. THOMPSON: The other issue speaks to this issue around civil suits. Now, am I to say to you that civil suits under this legislation is still subject to certain sensitive material and that even if a lawsuit was brought based on existing law, there are certain items that would not be available for public review in this civil suit?

MR. REITINGER: Sir, I need to spend I think more time to fully understand the nature of the language in H.R. 2868. I would say that in general on civil suit provisions I have a concern that civil litigation involving the CFATS regime would lead to a higher likelihood of disclosure of sensitive information covered under the existing CVI regime. As the committee knows, that information is highly sensitive and would be of use to people who wanted to do harm to the nation of the public.

Therefore, I think it's important to give full consideration to all of the different factors that are involved. I'm also somewhat concerned with regard to civil suits, that -- I'm sorry, sir.

REP. THOMPSON: Oh, oh, without going through it, but are you aware that there are certain -- and maybe you need to study it a little more. But there are some classifications in the bill that would prevent access to this information.

MR. REITINGER: I understand that, sir, and we'd be happy to work with the committee to make sure that those are as effective as possible. I am generally concerned, though, that civil litigation leads to, no matter what the protections are, a higher likelihood of disclosure of information. So I'd want to work effectively with the committee to make sure that those protections were optimal for ensuring sensitive information were not released.

REP. THOMPSON: But you do -- I'm not trying to (debate it ?), but in America that's one of the ways that our citizens have access to things they disagree with, is a court of law. And what we've tried to do is craft in this bill access, but also protect some of the secret, or top secret issues associated with it.

MR. REITINGER: I understand, sir, and obviously, there's always a balance between availability to information possessed by government, the First Amendment implications of that, and protection of sensitive information that could be used to harm the public. I understand that. That's a difficult balance to draw, and we'd be happy to work with the committee going forward.

I'm not, however, in a position to take a formal position on the bill that the committee introduced yesterday at this point in time, and I apologize for that.

REP. THOMPSON: Thank you. Yield to the ranking member from New York.

REP. KING: Thank you, Mr. Chairman. Mr. Chairman, when I assumed my position as ranking member back in January, I did not think I'd be sitting here as the defender of the Obama Administration and defending their policies, but I do believe, again, in a bipartisan way that when we believe the Administration is right, we should stand with them. And in this, I believe they clearly are right in some respects, certainly as far as the one-year extension.

Mr. Reitinger, in your testimony you said that you wanted to work with Congress to make the implementation or the regulations or the legislation as effective as possible, and you believed it would take over the course of the next year to do that. Now, the legislation has been introduced, and I'm not trying to play word games here. The fact is you mustn't believe that this legislation is as effective as it could be, and it's not the most effective piece of legislation. We're talking about a very complex area, and that's why I believe this extending out for a year makes a lot more sense rather than have this rush to judgment.

What would you envision doing over the next year? Assuming that the bill passed on the floor of the Appropriations Committee prevails and there is a one-year extension, what do you have in mind as far as what has to be done during the course of that year, as opposed to rushing it through in the next few weeks?

MR. REITINGER: So sir, once again, I'm not in a position to take a DHS or Administration position on the bill itself. But certainly, you know, within whatever timeframe is allowed, we would intend to work effectively with the committee to make sure that we crystallize a position and provide the best advice possible we can to the committee so that the bill addresses the needs that are -- that the committee is already discussing and includes appropriate resolution of all of the issues that are included within the bill.

REP. KING: On the issue of civil suits, have you considered at all how much time would go into that, responding to lawsuits, how much manpower, how much personnel have to be adapted to this? As it is, my understanding is that -- in fact, I understand the fact is that right now senior officials from the Department have to testify before 108 committees and subcommittees of the Congress, which is an extraordinary waste of time. You add to that lawsuits being brought, and as you said, there has to be a balance between security and what's open to the public. But have you looked into at all the amount of manpower that would be required, personnel hours required, if this is open to civilian lawsuits?

MR. REITINGER: No, sir. I can't say that it's I think possible to determine that in advance. My understanding is that there are some civil suit provisions that are rarely exercised and take little time, and there are others that are rapidly or often exercised and take more time. Certainly, reviewing such civil suit information -- and if testimony from the department was required -- would take some time from the department. We'd want to work, if a civil suit provision were included, with the committee to make sure that there was as little risk of disclosure of information as possible and that the diversion from other substantive work that the department is undertaking was as limited as possible. Certainly, it is true that any civil suit provision at least raises the specter of some diversion of resources.

REP. KING: Now, as I understand it, this would be the first time the department would be open to civil lawsuits. Is that true?

MR. REITINGER: I do not know of any other provisions where the department is open, but I can't say, sir, that I have talked with our Office of General Counsel and had them conduct an exhaustive survey yet.

REP. KING: And you've (expounded all ?) -- upon your concern about the danger of vital information being disclosed as a result of these lawsuits, whether it's in discovery, or whatever, you know, part of the proceeding would be.

MR. REITINGER: Well, sir, I perhaps have some degree of innate caution about this, having spent a large chunk of my career as a litigator, first on the civil side and then on the criminal side, and understanding what the scope of discovery and information disclosure is. I think that inevitably there is some risk of disclosure of information, and this information is very sensitive and is indeed pursuant to the authorizing legislation, treated as classified for some particular purposes. That said, as the chairman indicated before, there are First Amendment concerns. The public needs access to information. Those need to be carefully balanced, and I would want to have the department continue to work effectively with the committee, as it has been, to make sure that balance is drawn in the appropriate place.

REP. KING: If I could just ask one further question, actually make one more statement for the record as far as why this should not be rushed and why we should wait out the year -- my understanding is that two of the senior positions at DHS, the assistant secretary of Infrastructure Protection, the under secretary for National Protection and Programs Directorate -- those positions have not been filled, and they have very vital roles to play in the implementing of the regulations and the carrying forth of the legislation. Is that true?

MR. REITINGER: Neither of those positions has been filled, yes, sir.

REP. KING: And they would play a vital role or critical role as far as this legislation being implemented.

MR. REITINGER: Yes, sir.

REP. KING: Okay. I yield back.

REP. THOMPSON: The chair now recognizes other members for questions they may wish to ask the witnesses. In accordance with our committee rules, I will recognize the members who were present at the start of the hearing based on seniority on the committee, alternating between majority and minority. Those members coming in later will be recognized in order of their arrival. The chair now recognizes for five minutes the gentleman from Pennsylvania, Mr. Carney.

REP. CHRISTOPHER P. CARNEY (D-PA): Thank you, Mr. Chairman, and I'd like to thank you, Mr. Reitinger, Ms. Armstrong, for joining us today.

Ms. Armstrong, I actually have a question for you to start off. Now, as I understand it, present regulations and tiering structures -- about ten percent of underground natural gas reservoirs are subject to additional CFATS security requirements? Is that correct?

MS. ARMSTRONG: There are underground natural gas storage facilities that are subject to CFATS primarily based on the amount of methane stored there.

REP. CARNEY: Okay. And TSA and PHMSA also recommend and monitor security practices at these facilities as well?

MS. ARMSTRONG: If there is a pipeline exit, yes.

REP. CARNEY: Okay, just a pipeline access.

MS. ARMSTRONG: (Inaudible.)

REP. CARNEY: Okay, all right. Are there any conflicts between CFATS and TSA and PHMSA on how they monitor and regulate -- if you're storing the gas and monitoring the system, is there --

MS. ARMSTRONG: No, we actually have worked fairly closely with TSA. Their rule on their freight rail rule -- and we coordinate with them on a routine basis as we identify facilities that are subject to CFATS, or are in some cases with other agencies exempt.

REP. CARNEY: Okay. Now, when CFATS was first written, first developed, do you think it was intended to regulate and include underground natural gas storage?

MS. ARMSTRONG: CFATS was designed to regulate the security of chemicals of interest, as published in our Appendix A, which is 322 chemicals that -- at or above screening threshold quantity, holding those chemicals triggers compliant with CFATS.

REP. CARNEY: Does that include natural gas and because CFATS has a role to play in this?

MS. ARMSTRONG: It includes fuel mixtures that have a chemical of interest in them, such as pentane, butane, or methane.

REP. CARNEY: Understood. Cleared that up. In your mind, are the regulations sufficient, are they too much, or do they conflict with TSA, PHMSA?

MS. ARMSTRONG: Sir, I don't see any conflicts with TSA and CFATS.

REP. CARNEY: Okay. No further questions at this time.

REP. THOMPSON: Thank you. We'll now recognize the gentleman from California, Mr. Lungren, for five minutes.

REP. DANIEL E. LUNGREN (D-CA): Thank you very much, Mr. Chairman.

First, Ms. Armstrong, I want to thank you and the others in the department who worked hard to make CFATS work. It was something that we tried to get as free-standing legislation. We did not get that, but we did have it in appropriation language, which allowed us to go forward with this. And I think the spirit of cooperation of the industry and the work done at DHS has been very helpful to the security of this country.

One fact I'd just like to establish -- as I understand, the CFATS regulatory process -- our staff has broken down the various steps in current law. They've broken it down to eight steps, and according to their analysis, we're about at step five right now. In other words, we're in the middle of the process to make sure it's a completed, maturing process. Would that be correct as far as you're concerned?

MS. ARMSTRONG: On May 15th, we took another step in the program to move from reviewing security vulnerability assessments submitted by CFATS facilities to completing review of the initial group of preliminary tier one SVAs and issued approximately 140 facilities of final tiering notification, which included the deadlines for their submission of their site security plan, which for that group is September 15th.

REP. LUNGREN: But for the completed CFATS regulatory process, the last step would be DHS conducting inspections, both targeting and random, to ensure the facility's compliance with its SVA. We're not there yet, are we?

MS. ARMSTRONG: Correct. We have not done any inspections. Our inspectors have done a number over the past couple of months of compliance assistance visits to make sure we understand the content of a facility's security --

REP. LUNGREN: I guess my question more directly would be this. We've not completed the process of the entire universe of the regulated community at this point in time so that you would be to full maturity. Is that correct?

MS. ARMSTRONG: Correct. We have not verified content of site security plans.

REP. LUNGREN: One of the concerns I have is us passing legislation when we haven't finished the process of CFATS that you have been working on and the industry has been working on so that we can evaluate how we are doing at that point in time.

Excuse me. Is it Reitinger or Ritinger, or something else?

MR. REITINGER: Sir, I'll answer to just about anything.

REP. LUNGREN: I know that, but I like to get -- I remember I before E, except after C, or pronounced as A as a neighboring way. But that's only how you spell it. How do you pronounce --

MR. REITINGER: I think my name is roughly unpronounceable, but I generally say Reitinger.

REP. LUNGREN: Reitinger, okay.

Mr. Reitinger, with respect to the question of civil lawsuits, if I were to tell you there were potential 304 million civil lawsuits, would that disturb you?

MR. REITINGER: Yes, sir.

(Laughter.)

REP. LUNGREN: Well, the language Section 2116 has introduced is any person may commence a civil action on the person's own behalf against any person, including the United States or other governmental instrumentality or agency who's alleged to be in violation of any standard regulation, condition, requirement, prohibition, or order which has become effective pursuant to this title. Now, you're a former civil litigator. I'm a former civil litigator. Normally, you have a -- not an expanded universe, but a contracted universe of potential litigants. This language says any person. Don't you think that's a little bit -- overreach?

MR. REITINGER: Sir, I regret it. Again, I'm not in a position to take a position -- (inaudible).

REP. LUNGREN: Okay, well, I'll say I think it is overreach. Anybody involved in the civil litigation arena knows that if you have a potential universe of litigants who have no -- need to have no skin in the game, there doesn't have to be a single allegation that they have suffered any loss as a result of this. There's no suggestion that they have been injured. And so what you would have is for the first time since the creation of DHS a requirement that the department be liable to uninjured third parties in civil lawsuits.

So I know you want to be very careful (about what ?) you say. You said the administration has some concern about civil lawsuits. I would suggest it is more than just a concern about civil lawsuits. It is concern about civil lawsuits open to anybody in the United -- well, actually, it's not even limited to the United States. I limited my question to any person in the United States, but it doesn't even have that limited -- to millions of potential lawsuits.

And one of my concerns is that we've had the industry work in collaboration with the department with a certain level of trust, and would that trust be in some ways undercut by the possibility of lawsuits down the line, undetermined at this time in terms of nature and in terms of number? And even though you would say we would try and make sure we would keep this information secure, do we recall not too many years ago we required as a matter of law that all nuclear facilities have basically their blueprint available to the public on the Internet? And if that isn't a problem in terms of terrorism, I think this would be.

So I thank you for your testimony.

MR. REITINGER: Thank you, sir.

REP. THOMPSON: Thank you. Since the gentleman from California raised a lawsuit possibility, I want to read you what is in the act itself on the hearing today. It says, "The bill requires a 60-day notice before a suit can commence. If the secretary takes action to fix a problem or require compliance in that time, the suit is terminated. In addition, the court is only allowed to issue orders directing specific action on the part of the agency or facility in civil fines that are returned to the Treasury. Thus, there is no incentive for frivolous lawsuits." In other words, if you want to sue under this lawsuit, you have to notify the government within 60 days, and then the government has 60 days to fix the violation that you are alleging, and if so, the suit goes away.

REP. LUNGREN: Would the gentleman yield on that?

REP. THOMPSON: Yield to the gentleman from California.

REP. LUNGREN: By the very terms of what the gentleman has just said, it requires action on behalf of the department presumably to investigate the allegations contained in the lawsuit before they can even make a judgment as to whether or not it is worthy of remedy, and then they can remedy it. And I thank the chairman.

REP. THOMPSON: Well, thank you. Sixty days we think is good enough to see whether something is broken, and obviously, whatever needs fixing we can fix by filing it with the court indicating so.

We will now recognize the gentleman from Kansas City, Mr. Cleaver, for five minutes.

REP. EMMANUEL CLEAVER (D-MO): Thank you, Mr. Chairman.

Mr. Reitinger, right? In July, you notified 7,000 facilities of their initial high-risk assessment, and of the 7,141 of them -- have been assigned tier one status. My concern is that the timeline with regard to the rest of the tier assignment, as well as the requirements to complete and submit the site security plans --

MR. REITINGER: Yes, sir. So I'll give a quick answer and then ask Ms. Armstrong to supplement where we are in the process, because she's -- her level of detail, knowledge far exceeds mine.

As you said, we have done the first notifications to some of the highest risk facilities, and we will be over the next few months notifying the remainder of those who have been tiered. They will all have 120 days after notification to submit site security plans. Let me ask Ms. Armstrong if she can supplement that.

MS. ARMSTRONG: Certainly. Sir, you're correct. Last year, or right about this time on June 23rd, we notified 7,010 facilities of their preliminary tiering determination and the requirement to do a site -- an SVA, a security vulnerability assessment. And we have moved in the last couple of weeks -- last month or so -- into making final tiering notifications based on SVA review. One thing to remember about the CFATS numbers is that they're constantly changing because new facilities are filing a tox screen and starting their clock, if you will, if they screen in. And facilities are also resubmitting tox screens, notifying the department that they have made, for example, a material modification at the site, and their COI holdings are now different, and they are putting us on notice of that, as required in the rule. So that's why you see some of the changes in the numbers.

What the timeframe we're on right now is to -- by he end of this month notify a group of tier two facilities of their final tiering determination and site security plan requirement and then move in to perhaps as time goes on monthly notifications of threes and fours as their SVAs are reviewed.

REP. CLEAVER: Now, what is the ongoing process, I mean, after you've -- a site security plan has been authorized? Does DHS then require another assessment every year, every six months? I mean, what are we going to do in the ongoing plan to make sure that we have, in fact, done the -- made the proper step, taken the proper steps with regard to security?

MS. ARMSTRONG: Well, the rule itself speaks to the timeframe that facilities are on, but to -- suffice it to say that once we accept a site security plan, we will inspect the facility. We will be inspecting tier one facilities under the current construct every year and tier two every two years, and then handle the threes and fours accordingly.

REP. CLEAVER: Okay, yeah, that was my concern, whether it was -- whether we were going to do a one-time visit and that's it, or rotating or reoccurring visits.

And you're saying --

MS. ARMSTRONG: Correct. There will be --

REP. CLEAVER: -- once a year.

MS. ARMSTRONG: -- (inaudible) -- section cycle for each facility depending on its tier.

REP. CLEAVER: Right. Thank you, Mr. Chairman.

REP. THOMPSON: Thank you. We now recognize the gentleman from Texas, Mr. McCaul, for five minutes.

REP. MICHAEL T. MCCAUL (R-TX): Thank you, Mr. Chairman, and let me thank the panel and thank you, Mr. Reitinger, for your service, not only in the Justice Department where I worked as well, but also on the CSIS Cyber Security Commission making recommendations to this President on cyber security, many of which were adopted. And it was great work, and I'm glad to see you in the department serving this country well. I just have a couple of questions. I don't want to sound redundant, but I'm kind of curious. When did you get a copy of this draft legislation, Mr. Reitinger?

MR. REITINGER: Sir, first, let me briefly thank you and thank you for your leadership of the CFATS Commission. It was a pleasure to serve under your chairmanship there.

REP. MCCAUL: Thanks.

MR. REITINGER: In terms of the legislation, I personally reviewed a draft copy last week, and I believe the formal copy was just introduced yesterday, so I've begun to review that now, but have not completed it yet.

REP. MCCAUL: Okay. Then in your testimony last week you testified that the President requested -- and the department -- a one- year reauthorization or extension, as the ranking member has pointed out, to have more time to work effectively with the Congress for a permanent reauthorization. And that seems to me to make eminent sense. It sounds like a reasonable request on the part of the Administration. Can you perhaps explain to this committee why it's important for the department -- and the President obviously believes it's necessary as well -- to have this one-year extension?

MR. REITINGER: Yes, sir. At least it seems to me based on the questions around the table that there is near consensus that the CFATS regime has been an essential step forward towards protecting chemical site security. Obviously, we did not want the regime to lapse while further discussions were taking place about a reauthorization of the program, and so the President requested a one-year extension to give time for the discussions around what that authorization might look like.

REP. MCCAUL: I just submit to the chairman -- that's certainly I think the position on our side, is that a one-year extension makes eminent sense to get the bill right. But that's just our view. The litigation issue is concerning as well. An uninjured plaintiff can bring a lawsuit, third party lawsuit. You know, this could include just about anybody out there, which could tie down the department with extensive litigation. The time, the cost -- you and I having worked in the Justice Department know the burden of that type of litigation. Is this the first time the department will be open to these types of lawsuits?

MR. REITINGER: Yes, sir. I cannot specifically say it would be the first time. I'm not aware of other provisions like this, but I have not done either the exhaustive research myself, nor do I have access to the appropriate legal tools to do that anymore, nor have I asked our office's general counsel to engage in that inquiry yet, but --

REP. MCCAUL: Well, just based on my experience, I can tell you, it's going to increase the workload and the burden, and I think it's also going to perhaps put in jeopardy some of the -- as the gentleman from California talked about, some of the protected information -- I mean, you have critical infrastructures that want to work with the government cooperatively, and yet we're in a place at this litigation risk calculus where this type of protected information could potentially get disclosed in a public lawsuit, which I think is going to hurt our relationship with the private sector in terms of what we're trying to accomplish here, and security being the ultimate issue.

Finally, if I could just say with respect to implementing inherently safer technologies -- you stated in your testimony that the CFATS regs did not prohibit companies from doing that today. Is that correct?

MR. REITINGER: Yes, sir.

REP. MCCAUL: Okay. Now, this would actually mandate that implementation. Do you think the department's in a position to be able to make those kind of evaluations, or should the market -- is the private sector and the market in a better place to make those decisions?

MR. REITINGER: Sir, what I'd say is, as you point out, the existing regime allows for regulated entities to use inherently safer technologies to tier down or perhaps tier out -- or as apart of their protective plan. But it's not mandatory. Were we responsible for judging whether ISTs -- whether they should be imposed and what those particular ISTs should look like -- we would -- although we are developing expertise in our Chemical Inspector Corps, we would need to go farther and certainly bring in some additional experts to be able to effectively fulfill that mission.

REP. MCCAUL: And I see my time has expired. Thank you.

REP. THOMPSON: Thank you very much.

Ms. Armstrong, for the record, since you have primary responsibilities for CFATS and some other responsibility directly related to where we are, are you familiar with this legislation, and have you been provided a draft routinely by committee staff?

MS. ARMSTRONG: Yes, sir.

REP. THOMPSON: Over what period of time?

MS. ARMSTRONG: I believe we saw an April draft and a early June draft in addition to the bill that was released last night.

REP. THOMPSON: So basically, you've had knowledge of everything going on so far.

MS. ARMSTRONG: Yes, sir.

REP. THOMPSON: Thank you. The other point I want to make is that every other piece of legislation related to this -- Clean Water Act, Safe Drinking Water Act, Toxic Substance Control Act, Water Pollution Control Act, Atomic Energy Act -- all of them have references to civil suits. Clearly, because we're a nation of laws, our citizens have to have an opportunity to have their day in court, whether they are right or wrong. And what we've done with this 60-day provision is to screen out what we think frivolous lawsuits would work an undue burden on the agency by saying the secretary can take that complaint within 60 days, file whatever response with the court, and it'll go away. And then that's the intent of the legislation.

We now recognize Ms. Clarke from New York for five minutes.

REP. YVETTE D. CLARKE (D-NY): Thank you, Mr. Chairman. I too find this whole topic of the civil litigation somewhat intriguing and just wanted to get a sense from both of you -- and good morning. It's good to see you again, Under Secretary Reitinger and Assistant Secretary Ms. Armstrong. There's been discussion today about civil suits and how they will impact the functioning of the department. Is DHS subject to suit under the environmental statute?

MR. REITINGER: I'm going to defer that question to Ms. Armstrong.

MS. ARMSTRONG: And just for the record, I'm the director of the Infrastructure Security Compliance Division, though thank you for the promotion. (Laughter.) (Inaudible.)

REP. CLARKE: Okay, we've got to fix the materials here. (Laughs.

) Go on.

MS. ARMSTRONG: In terms of subject to environmental litigation, I would say at a very high level the department is subject to NEPA type requirements when we impact the environment. But I don't know of any provisions that we are expressly subject to under how we implement CFATS at this point in time.

REP. CLARKE: Okay. So, I mean, are splitting hairs here, or would you say that the department is subject, particularly in the area of environment?

MR. REITINGER: Let me see if I can supplement what I've said, Ms. Clarke. I worry about several things in civil suits that amount to concerns about a provision that would subject the department to civil suits in these circumstances. One is disclosure of confidential information. Another is diversion of resources. And as I said before, while there are clear reasons why one might want to empower private citizens to bring these sorts of actions and there are also concerns about public access to information, those have to be carefully balanced about -- with respect to both maintaining the confidentiality of highly sensitive information and enabling the department to effectively implement the regime, you know, from the -- less importantly at the political level, but much more importantly down through the subject matter experts.

And so I would want to be very sure that any legislation drew the right balance to enable the strongest possible protections for chemical facilities, and therefore, the strongest possible protections for the public.

REP. CLARKE: And so are you saying that you are not in favor of citizens being able to bring suit if it's warranted? I mean, I understand your position with respect to privacy of the information that may be contained regarding chemical facility, but your emphasis seem to be very heavily on that. You know, you say you're trying to strike a balance, but it just doesn't come across that way.

MR. REITINGER: So I would say that I'm not in a position to take a formal position on the bill that was introduced yesterday. But I and the department have significant concerns about civil suits in the context of CFATS.

REP. CLARKE: Are you aware that the Nuclear Regulatory Commission is subject to citizen suits as well, and in any given year it is sued ten to 15 times within that year? And this is, you know, in mind. Is there any real reason to expect that there will be like a flurry of litigation with regards to citizens' suits included in this bill?

MR. REITINGER: Ms. Armstrong may have additional information. The one other thing I'd point out, ma'am, is that there are obviously a very large number of high-risk chemical facilities around the country, around --

REP. CLARKE: Some very close to New York City.

MR. REITINGER: Understood, ma'am. So I think there's a potential risk for a high amount of litigation, but I'm not in a position now to do a comparative analysis with the Nuclear Regulatory Commission provision.

REP. CLARKE: Well, we'll just hope you'll bear that in mind as you go through your review of the provision within this bill.

And having said that, Mr. Chairman, I yield back the balance of my time.

REP. THOMPSON: Thank you very much.

The gentleman from Pennsylvania, Mr. Dent, is recognized for five minutes.

REP. CHARLES W. DENT (R-PA): Thank you, Mr. Chairman. I just wanted to first say I have letters here from over 40 organizations opposing H.R. 2868, the Chemical Facility Antiterrorism Act of 2009. These organizations include the Farm Bureau, the Trucking Association, the Chamber of Commerce and many others. I'd just like to submit these for the record.

REP. THOMPSON: Without objection.

REP. DENT: Thank you. Also, Mr. Reitinger, good to see you again. Ms. Armstrong, good to be with you too. I just wanted to say a few things first.

Mr. Reitinger, how many IST specialists do you have on staff today in DHS?

MR. REITINGER: Sir, I think the answer is none because we don't have any positions that are formerly IST specialists, but I think we are in the process of hiring chemical inspectors who may have some -- will have an increasing degree of knowledge generally around chemical facility security.

REP. DENT: Okay, that's not particularly reassuring, but I hear you. Would the $19 million increase in the President's fiscal year 2010 budget request for the Office of Infrastructure Protection -- how many IST specialists -- you've -- I guess you kind of answered -- how many do you bring on board? So it's actually three people, two or three? Three people with some background?

MR. REITINGER: Sir, again, I don't know that we have anyone that I would formally say now is an IST specialist because we are budgeting under the current regime.

Ms. Armstrong, can you supplement that answer?

MS. ARMSTRONG: Certainly. I would agree that we don't have anybody that is by title an IST specialist on staff. We have hired chemists, chemical engineers, inspectors, and other program staff --

REP. DENT: Okay.

MS. ARMSTRONG: -- for the program, and the budget increase is to allow us to continue to staff up to full compliment and to continue to deploy and maintain compliance tools for industry.

REP. DENT: Okay, so you have a limited staff. Let me ask -- (the end ?) -- and following up on Mr. McCaul's question -- let me ask -- yes or no response here. Do you believe that requiring IST implementation is necessary, or simply preferable? I think we need to get that on the record here.

MR. REITINGER: Sir, I regret giving you a yes or no answer would require me taking a specific position on the bill, and I'm not ready to do that. What I can say is that the current regime allows for companies to use inherently safer technologies in either tiering out or in responding to -- including within their site's security plan -- excuse me -- in tiering out or reducing their tier. Therefore, we would be happy -- and we would be happy to work with Congress to have the best possible provision going forward.

REP. DENT: Understood. Another issue I have -- and this is -- you know, many industry and company-specific studies show massive cost to substitute chemical products. This committee's discussed this many times over the years. Has there been any DHS analysis on the cost to mandate product substitution for chemical facilities? And has there been any analysis on potential job loss for mandating such substitution?

MR. REITINGER: Well, let me defer that question to Ms. Armstrong.

MS. ARMSTRONG: Thank you. We are not in ISCD at the point of such specific analysis. The Science and Technology Directorate of the Department is doing and should complete this summer a literature review related to the topic of IST to start building a base of information on that topic.

REP. DENT: Do you -- (inaudible) -- IST as an engineering practice, I mean, that that's essentially what it is? It's really -- deals more with workplace safety issues perhaps than plant security issues? Do you agree with that?

MS. ARMSTRONG: I think that there is enough debate in industry and academic, et cetera, that I can't take a position on that very topic.

REP. DENT: But somebody's going to have implement this, and we have to understand what it is and what it is not. And I've talked to a number of engineers who tell me this is really a workplace safety issue. It is not a chemical plant security issue, therefore, should not be mandated into legislation. And I think if we're going to mandate such a practice, we ought to know what we are doing here, and I'd appreciate if, you know, I could get some guidance from the department. I think you're right to ask for this one-year extension, by the way, on CFATS regs, and because of these types of questions, for which you may not be able to give us an answer, or not allowed to give us an answer. So I'd appreciate some clarification on that point.

Another question -- has there every been any analysis or study completed that shows the MTSA is not working, or MTSA facilities are not safe?

MS. ARMSTRONG: I don't think that there has been any specific analysis at that question. I'm sure that the Coast Guard has requirements to provide reports on progress in implementing MTSA.

REP. DENT: And has DHS conducted a strict assessment of the current CFATS program? If it has, has it been presented to Congress?

MS. ARMSTRONG: We don't have a requirement at this point in time to provide a sort of annual congressional report.

REP. DENT: Okay, thank you.

REP. THOMPSON: Thank you very much.

Ms. Armstrong, Mr. Dent talked about staff, and am I to understand that some of the requirements for CFAT and others is ongoing and that you are, in fact, still hiring as we speak, whether this legislation passes or not?

MS. ARMSTRONG: Yes, sir. We are continuing to hire. I have a selection certificate for three positions to bring security specialist expertise to the program on my desk. As of this date, we either have on board or are in the process of on-boarding approximately 125 people.

REP. THOMPSON: Thank you. With respect to the legislation, we're talking about an additional $100 million to provide the department for both the regulatory and staffing requirements to implement it. So we are indeed not adding burden to the agency without providing the resources to do the job.

I now recognize the gentleman from Texas for five minutes, Mr. Cuellar.

REP. HENRY CUELLAR (D-TX): Thank you, Mr. Chairman. And I guess what a lot of us are trying to do is find a balance between security and of course some of the industries that we represent. As you know, in Texas the chemical industry down there -- we have over 77 chemical manufacturers operating more than 200 facilities. A lot of jobs are created. And I know there's been concern, and I appreciate you working with myself and I think with Al Green on some language. And I am, in particular, talking about Section 2111 and 2103, and I believe you also have shown the willingness to work with us on some report language, and I certainly want to work with you on that report language, but I do want to thank you for enhancing that language on that when it comes as -- form of a manager's amendment or whatever vehicle you're going to use.

So I know Al Green has shown some concerns, so I want to thank you and look forward -- working with you to further enhance the language to address some of the issues.

Mr. Chairman, thank you.

REP. THOMPSON: Thank you very much. The gentleman yields back?

REP. CUELLAR: Yes, I yield back.

REP. THOMPSON: Recognize Mr. Cao for five minutes.

REP. ANH JOSEPH CAO (R-LA): Thank you, Mr. Chairman.

Mr. Secretary, my main concern in connection with this bill is the mandatory implementation of ISP. Small businesses, which make up the bulk of my district's local economy, will pay tens of thousands of dollars to implement these measures. The impact of this bill on the agriculture industry will be enormous. According to the Louisiana Department of Agriculture, more than 30,000 farms in our state will be affected at a cost of more than $120 million.

To quote the state agriculture commissioner, open quote, "If we are not very careful with how we regulate the cost of implementation of this bill and jumps in fertilizer cost could cause food inflation upwards of 10 percent. At the rate we are going in this country, we will have regulated ourselves into a position in which we can't feed ourselves," end quote.

My question to you is how is evaluating alternative processes necessary to produce (synthesizers, rubber, paint, fertilizer, etc. ?) related to homeland security?

MR. REITINGER: Sir, let me say that, first off, with regard to agricultural end users under the CFATS regime my understanding is that in December of 2007 an extension was granted to submit Top-Screen, and so there are no current regulatory requirements under the CFATS regime with regard to them. I could ask Ms. Armstrong to supplement that answer.

MS. ARMSTRONG: That's correct. At the time of publication of Appendix A to CFATS, we noted that there was an unintended consequence of the rule in that at current screening threshold quantities we would screen in potentially individual homes, small businesses, and farms, which was not the intent of the CFATS program. It is to identify and protect high-risk chemical facilities. So we did issue an indefinite extension for certain agricultural chemical end users and we are working right now to resolve that situation.

REP. CAO: Besides the unintended consequences that you just outlined, what other unintended consequences do you know that may result because of this bill?

MR. REITINGER: If the question is the bill that was introduced yesterday, I regret I'll need a little more time to look at the bill to formulate a position and work effectively with the committee. But you have my personal commitment to work effectively with the committee on the authorization language.

REP. CAO: My second -- my second concern in connection with this bill is the inherent jurisdictional conflicts between DHS and EPA and DHS and the U.S. Coast Guard. Do you have procedures in place in order to resolve this conflict?

MR. REITINGER: Let me -- let me talk about those -- both of those things and then perhaps Ms. Armstrong may want to supplement that. With regard to the issue with MTSA, we are in ongoing discussions with the Coast Guard to work towards harmonization of the CFATS and MTSA regimes so that we have a consistent level of protection across both MTSA and CFATS. With regard to wastewater and water treatment facilities, drinking water facilities, we believe that there is a coverage -- a security gap with regard to them that needs to be addressed.

MS. ARMSTRONG: And I would just add that we don't have a conflict with either EPA or the Coast Guard. To echo the point, currently water and wastewater treatment facilities are exempt from CFATS and we are working very closely with the Coast Guard within DHS to harmonize our approach to both MTSA and CFATS implementation.

REP. CAO: Thank you, Mr. Chairman. I yield back the balance of my time.

REP. THOMPSON: Thank you, and for the record, again, Ms. Armstrong, you clarified the agricultural concern, and basically this legislation adds no new burden on agriculture. CFATS is CFATS. It's already law. So whatever concern that individuals would have it wouldn't be with this bill. It would be with existing law from CFATS' standpoint. Am I correct?

MS. ARMSTRONG: That's correct, sir. Yes.

REP. THOMPSON: Thank you. Chair now recognizes the gentle lady from Nevada for five minutes, Ms. Titus.

REP. TITUS: Thank you, Mr. Chairman. I would address this to both of you. On May the 4th, 1988, there was an explosion at the PEPCON facility and that was a rocket fuel manufacturer that had been built originally in kind of an isolated area of the desert but by the time it exploded it was surrounded by the suburbs of Henderson. As a result of that explosion, two workers were killed, 372 people were injured, and a $100 million in damage was done up to 10 miles away to buildings, homes, other facilities.

Resulting from that, the Nevada legislature enacted a very tough storage/disclosure/safety law to prevent that from happening again. Now, we want to keep workers and residents safe and facilities secure but we don't want to create a kind of bureaucratic nightmare where there are all these kind of conflicting regulations and duplication of reports that have to be filed. Would you address how you work with states and how this regulation or legislation might interact with what we've already got in place?

MR. REITINGER: I'll give a quick response and then ask Ms. Armstrong to supplement. The point I would make on preemption is that there is nothing in the current regime that prohibits states from implementing regimes that are more protective of facilities or the people in the state than the existing regime at least insofar as those regimes do not expressly conflict with the purpose of CFATS. In addition, I know that well prior to my arrival at the Department of Homeland Security, Sue and her team and other people across the department were working very effectively with states and local governments to ensure we had the best regime possible. And with that, I'll ask her to supplement.

MS. ARMSTRONG: Thank you. One of the kind of tenets of CFATS is that we don't intend it to conflict with existing regulatory compliance that's out there. As we know, there are many, many, many federal and state programs. So we built the, in particular, the site security plan template for CFATS to allow reporting and articulating how a facility is in compliance with other regulations if that facility is indeed covered by CFATS due to holdings of chemicals of interest. And I would echo that we have worked very closely with states.

We recognize Homeland Security advisers has authorized CVI users and share information with them to help them better secure facilities that are in their jurisdiction, and if you look at the risk-based performance standards that underlie CFATS there are a few that do speak to the working relationship between owners and operators and their first responders in state and local jurisdictions, and we will be looking for multi jurisdictional joint planning and exercising of those plans at high-risk chemical facilities.

REP. TITUS: Thank you, Mr. Chairman. I yield back.

REP. THOMPSON: Thank you. Chair now recognizes gentleman from Michigan is -- oh, Olson. I'm sorry. Olson from Texas.

REP. OLSON: Thank you very much, Mr. Chairman. And I have a couple questions, just getting back to the CFATS, and as my colleague from California mentioned there's sort of an eight-step process that the department is going through and we're basically at step five now. This isn't an official thing but where DHS reviews the SVAs and assigns the tiers, and the next three we've got to go are, you know, facilities completing the site security plans, a DHS review -- approved (for viewing those ?) and approve or rejecting them, and then finally, you know, DHS conducting inspections.

How much longer -- and this has been a three-year process to get to where we are on quote, unquote, "step five" -- how much longer will it take to get the next three steps and get the CFATS program fully up and running? Either or.

MR. REITINGER: So I would start by saying the CFATS program is up and running. We haven't completed all the steps yet, but as I think the timeline shows, we've been working very avidly to do that and I think have made steady progress. In terms of where we -- the last step is essentially that of inspections, I think, on the eight- step program you did, and my understanding is that those inspections will start during the next fiscal year. But let me ask Sue to supplement that.

MS. ARMSTRONG: That's correct. We anticipate doing the first inspections of Tier One facilities in the first quarter of Fiscal Year '10.

REP. OLSON: Okay. So that makes sense. That's why the administration's asking for the one-year extension because basically it will start running again, and maybe the wrong words I used but it'll be fully up and running at the eight-step process by the end of the year. One other question I'd like to ask is just about the Maritime Transportation Security Act and how many facilities have claimed an exemption that are affected by the MTSA from CFATS?

MS. ARMSTRONG: In the initial submission of Top-Screens and preliminary tiering, 365 facilities claimed full exemption under MTSA and 135 claimed partial exemption under -- due to MTSA.

REP. OLSON: Okay. Three hundred and sixty-five full and 135 partial.

MS. ARMSTRONG: Partial.

REP. OLSON: Is that correct? Okay. And how many inspectors are you going to have at the end of 2010? We've talked about a lot of the manpower needs that are probably going to come, you know, if we do have the inherently safer technology and the civil suits and brings the department exposed to them. It certainly sounds like you're going to have to grow the department and are you going to have the manpower, the inspectors, at the end -- do you think you'll have at the end of 2010?

MR. REITINGER: Yes, sir. For those of you who are at the committee hearing I testified at last week, you know that continuing to expand the personnel resources in the National Protection and Programs Directorate is my personal top priority. We've got some great people and we need to continue to get more of them. The plan for FY '10 in terms of field inspectors is to have 139 CFATS inspectors and 20 -- to throw out a term, 20 FTE, 40 FTP full-term positions -- or sorry, full-time positions and who are cross trained ammonium nitrate CFATS inspectors during the Fiscal Year 2010.

REP. OLSON: Okay. Thank you very much, and one final question. I got a little more time than I thought I'd have. But the Texas Chemical Council has written me and they're concerned about some of the overlap and conflict that, again, may exist with the Maritime Transportation Security Act, MTSA, which we talked about earlier, and, you know, they -- they've begun hiring -- I think they've hired over 200 maritime inspectors -- marine inspectors -- the last year. These are going to oversee the MTSA facilities, and how can they -- how do you think they can inspect over 7,000 facilities with 200 inspectors? I mean, those numbers don't seem to match up to me. Any comments?

MR. REITINGER: I'm not sure I understood the question, sir. The --

REP. OLSON: The -- and let me just rephrase it. Again, this is under the MTSA but there are 7,000 facilities that are covered by the MTSA and Coast Guard began hiring last year their inspectors. They've got up to about 200 right now. So we've got 200 inspectors who are basically being tasked with inspecting over 7,000 facilities. Those are -- that's a heck of a big discrepancy in the numbers and I just wanted to get your thoughts on how they can make that work.

MR. REITINGER: Sir, I'd had to defer that question to the Coast Guard. I don't think it's appropriate for me to comment on their resourcing of their statutory missions. I'm sorry.

REP. OLSON: Appreciate the answer and I appreciate your time. Thank you both very much. I yield back my time, Mr. Chairman.

REP. THOMPSON: Thank you. Chair now recognizes the gentle lady from California, Ms. Richardson, for five minutes.

REP. RICHARDSON: Thank you, Mr. Chairman. I'd like to take this opportunity to get us back on track of the actual bill itself, which is the Chemical Facility and Anti-Terrorism Act of 2009. It's my understanding the reason why we're considering this bill is for very serious reasons and I think the public needs to get back on track of that discussion. Number one, we're talking about it because there's the potential release of toxic, flammable, and explosive chemicals that could have a potential to create adverse consequences for human life and health.

So when we talk about (it here ?) we're talking about ongoing possibilities that the American people are facing on a day-to-day basis. The second concern is theft and diversion -- chemicals that have the potential to be stolen or diverted and to be used and converted into weapons that could cause significant adverse consequences for human life. And then the third reason is the potential for sabotage and contamination.

Now, sir, in your own testimony on Page 6 you say, "As DHS has stated before, we believe that there is an important gap in the framework of regulating the security of chemicals in the United States, namely drinking water and wastewater treatment facilities. We need to work with Congress to close this gap in order to secure the substances of concern at these facilities and protect the communities that they serve. Drinking water and wastewater treatment facilities that would be considered high risk due to the presence of substance of concern should be regulated.

However we do recognize the unique public health and environmental requirements and responsibility of such facilities. For example, we understand that a cease operations order that might be appropriate for a chemical facility under CFATS could have a significant public health and environmental consequence when applied to a water facility."

In my district, we have several chemical facilities, and my whole comment is -- it's my understanding we've waited on legislation such as this for three years and my comment is I'm not willing to continue to put the residents that I'm responsible to ensure that we have the adequate protections and preparation in place to wait another year.

And in closing, I just want to reiterate because I've heard several questions from my colleagues, and you didn't say this in the answer and I think it's important to restate and then I'd ask your comment on. According to the legislation that we have before us, it is intended to reduce the consequences of a terrorist attack. The bill authorizes the DHS secretary to require the implementation of inherently safer technologies, or IST, for Tier 1 and Tier 2, which are the highest risk tiers.

However -- and this is, I think, the thing that needs to be repeated here today -- however, before the secretary can require the implementation of an IST bill, he or she, but in this case he, must make the factual determination of that implementation, and within the secretary the secretary has the purview to determine is it technically feasible, is it cost effective, will it lower the overall risk that's not -- without disproportionately shifting the risk elsewhere in the supply chain, and number four, would not impair the ability of the facility to continue its operations in its current location.

So the legislation is quite clear and gives the secretary a tremendous amount of discretion and flexibility to adjust. Do you agree and do you understand that and have you read this?

MR. REITINGER: I have read that provision, ma'am. I'm not in a position to take a position on it yet but I understand that the committee has made efforts to ensure that the secretary retains discretion (in that space ?). I would like to go to what you said before. Certainly, as your quoting of my testimony points out, we believe that there is a gap around wastewater treatment and drinking water facilities that ought to be addressed.

I would also say that we at the department do not intend to sit on our hands but intend to move forward and continue implementation of CFATS as we have been doing, to do our absolutely best under the existing regime or whatever regime may come to protect the public from the risk of the release of the various threats and vulnerabilities you pointed out.

REP. RICHARDSON: We both have different jobs. Your job is to implement the legislation and ensure that the laws are carried out. Our job is to create the legislation to make sure that that happens, and I think there's a role for both of us. So again, I want to come back to my point of the secretary's flexibility because there were questions here of my colleagues.

The secretary does have the flexibility that it it's not technically feasible, if it's not cost effective, if it would lower the overall risk and disproportionately shift the risk elsewhere in the supply chain, and if it would impair the ability of the facility to operate the secretary has the discretion to step forward, and that needs to be clearly said in testimony. Do you agree?

MR. REITINGER: My understanding is that is what the bill provides. We'd be happy --

REP. RICHARDSON: Okay.

MR. REITINGER: -- (inaudible) -- to work with Congress.

REP. RICHARDSON: I just wanted to make sure you acknowledged that. Thank you, sir.

REP. THOMPSON: Thank you very much. The chair now recognizes the gentleman from Indiana for five minutes, Mr. Souder.

REP. SOUDER: Thank you, Mr. Chairman. The more I hear the more concern I want -- I get with Congress -- as a follow-up to Congresswoman Richardson's. Do you, Mr. Reitinger, agree here that -- because we've had this new -- since 9/11 and the reason the creation of Department of Homeland Security was terrorism and we've had this kind of rather than mission creep more like potential mission leap here, and that is is that our -- do you view any of your responsibility to deal with the risk of these chemical facilities if there is a flood, a hurricane, or tornado, or is it just focused on terrorism?

MR. REITINGER: Let me defer that question to Ms. Armstrong who's much more -- (inaudible) -- familiar with the statutory scheme.

MS. ARMSTRONG: Well, CFATS is in and of itself a security regulatory program with a definite anti-terrorism bent to it, and as we heard it is focused at looking at three main types of security issues -- the potential for a toxic, flammable, or explosive release at a facility --

REP. SOUDER: But caused by a terrorist or just --

MS. ARMSTRONG: Caused by --

REP. SOUDER: -- from an industrial accident, for example?

MS. ARMSTRONG: -- a deliberate attack.

REP. SOUDER: Do you view yourself as trying to make things safer from an industrial accident or from terrorism?

MS. ARMSTRONG: From an intentional act -- yes, sir.

REP. SOUDER: Okay. And that in that -- in looking at it as an intentional terrorist act, how do you move from there -- from, say, protecting a facility to micromanaging what a facility might make? In other words, do you view part of your mission as to say -- and I think (you were ?) dealing with some variations of this, for example, whether it be anhydrous ammonia or something else -- is is that could you tell a facility (that it to ?) given the fact of some of the guidelines if they don't shut down to, say, take a product that is more expensive and less effective because you've concluded that it's safer from terrorists?

MS. ARMSTRONG: Well, there's no requirement to do that at this point in time but I would be not inclined to tell industry how to do its business and what a cost-effective process is for a particular facility. Our focus is on security. But if I could go back to your original point, the ISTD is one division in the Office of Infrastructure Protection and the larger mission of IP is to coordinate the national effort to protect all CIKR across all 18 sectors, and IP has a distinct role in incident management to support CIKO -- CIKR owners and operators when there is an incident to help them with doing damage assessment, to help provide credentialing and access to damaged facilities for workers who need to get back to -- get a facility back up online, or -- and also to participate as the infrastructure liaison in a joint federal office. It's -- (inaudible) --

REP. SOUDER: So are you thinking like in a traditional FEMA function?

MS. ARMSTRONG: No. We're focused -- FEMA is focused on human lives and disaster response. We are focused on helping owners and operators get back up and operating to provide key things like clean water, food, et cetera.

REP. SOUDER: The challenge that I have, whether it be these random lawsuits which commonly occur -- I remember when I -- in an earlier life when I worked for a senator from Indiana that there was a aluminum facility where people were convinced, at least a few who would have certainly filed a lawsuit whatever angle they could, that this aluminum company was replacing the cows at night because they were dying during the day because of pollutants and therefore they were doing this at night, and they would have found any reason to try to harass this facility.

In my congressional district, we're the number one manufacturing district in the United States. Every single thing is a collection of chemicals. Agriculture needs chemicals -- that when two hydrogen facilities went down because of Katrina, even though steel production only requires a little bit of hydrogen all the steel industry would have gone down. The auto industry would have gone down. The truck industry would have gone down.

Every time there's any additional lawsuits there's a cost. Any time there's regulations that may not be directly related to the issue at hand there's an increase of cost. That puts companies right now -- where my average unemployment rate is 15 percent in my eight counties -- it puts them at additional risk of being able to produce. It puts them at additional cost to the consumers at a time when this government is worried about deflation, not inflation.

It puts additional cost on the consumers as they're making less, and that there needs to be a definite clear stated terrorism risk rather than kind of micromanaging potential things that might be preferable that could blow up 10 people here or there, and I'm worried that we're drifting away from our original very targeted mission. Yield back.

REP. THOMPSON: Thank you. Chair would like unanimous consent to enter into the record the statement for this hearing from U.S. PIRG -- Federation of State PIRGs without objection. Chair now recognizes the gentleman from New Jersey for five minutes, Mr. Pascrell.

REP. PASCRELL: Thank you, Mr. Chairman. Mr. Chairman, I have a different definition of mission creep. That's when you listen to citizens' phone calls without justifiable reason or a court order. That is mission creep. We've been discussing this issue for four years. We've had bipartisan support, moving in a very specific direction to try to resolve problems rather than create them. Now, the question I have for the deputy under secretary and Madame Assistant Secretary of Homeland Security deals with the subject of delegating oversight responsibility to state governments.

Now, New Jersey, which has a large chemical industry, it's a standard bearer nationally for chemical security protections. I believe that in many ways the federal government is catching up to New Jersey through the critical legislation we are considering today, which I totally support. In fact, New Jersey passed the Toxic Catastrophic Prevention Act of 1986 when I imagine few people even believed chemical security was an issue.

And it is an issue, but New Jersey has successfully implemented the standards in a state that is not only the most densely populated in the nation and amongst the most active in commerce but also in a state that has 800 different chemical facilities including 45 facilities that manage extraordinary hazardous materials, and as we all know New Jersey is home to the most dangerous two miles in America, just to get the picture here. You know, beyond special interests of a specific industry, we ought to consider the safety interests of the American people, specifically those who live near these chemical facilities. I think that's important.

We have seen over the last four years what happens, God forbid, if there is any kind of a manmade or just an accident, disaster, the toxic chemicals that would affect many lives and kill many people not only in those two miles. I believe that the states should play a greater role, Mr. Chairman, in the oversight of this new and much- needed chemical security regime. A similar relationship is shared between the states and the EPA, the Environmental Protection Agency, with regards environmental protections.

It already exists. So Mr. Under Secretary and Madame Assistant Secretary, let me ask you both -- do you believe that the Department of Homeland Security can support permissive enabling language delegating some oversight responsibility to state governments in the Chemical Facility Anti-Terrorism Act of 2009? And I would ask you to be specific. Thank you.

MR. REITINGER: So I'll take a crack at that first, sir. The current statutory regime authorizes states to go beyond CFATS in the sense that it does not preempt state regulation that is more restrictive and does not conflict with the basic purposes of CFATS, and the regulations do the same. So states in essence already have the capability if they want to go farther than CFATS to do it.

At the same time, I think it's important to have a comprehensive and baseline national regime that sets a floor across the country or a baseline that ensures that we have a sufficient level of protection in order to address the risk of a terrorist act to protect the public around the country. The other thing I would say is that we are working very effectively with states, and with New Jersey in particular, on not only the CFATS regime but in the case of New Jersey ensuring that there is sufficient outreach to the private entities in the state so that we can be -- have a greater degree of assurance that everyone who is subject to CFATS and should submit a Top-Screen is aware of that requirement and does so. And with that, let me ask Ms. Armstrong if she'd like to supplement the answer.

MS. ARMSTRONG: Thank you. And I would just add that at this stage in CFATS, the program itself, we are working to manage risk at the national level and we are also working to implement the program at the national level, and by that I mean ensuring consistency in our interactions with covered facilities, particularly when we do inspections. So I think it's important to ensure that there is a national-level oversight of the program as we move forward.

I would also add that, indeed, one of the witnesses that you'll be hearing from next from New Jersey helped us in a pilot that we did with both New York and New Jersey to come up with a way to engage states to help us identify facilities that perhaps should be in compliance with CFATS but for whatever reason are not at this point in time.

REP. PASCRELL: Just in conclusion, Mr. Chairman, I thank you both. I'm not in any way suggesting we do not have a national baseline. What I'm suggesting is a delegation of some of the oversight responsibility. Everybody has skin in this game. This is critical. This is important. This is life and death, and I think we ought to take a look at that. Thank you, Mr. Chairman.

REP. THOMPSON: Thank you very much. Chair now recognizes the gentleman from Ohio for five minutes, Mr. Austria.

REP. AUSTRIA: (Off mike) -- I believe that these authorized amounts for grants are adequate in accomplishing what we are trying to set out to do and will achieve the desired effects that we're trying to accomplish with this plan?

MR. REITINGER: Sir, I'd need to, I think, spend more time with the bill before I could do a full cost analysis and prepare a budget proposal for what implementation of the regime would be. As Ms. Armstrong said before, we are actively budgeting and working to fulfill our mission under the existing regime and under whatever changes Congress may impose.

MS. ARMSTRONG: I don't have anything to add. I concur.

REP. AUSTRIA: Okay. Well, again, you know, I just think it's important that we understand and we're going through this difficult time that we're not burdening the industry with duplicative and nebulous regulations that are out there that are going to hurt business during a difficult economic time. And Mr. Chairman, if it's all right I'll just submit the rest of it -- my statement for the record.

REP. THOMPSON: Thank you for your remarks. Chair now recognizes the gentle lady from Texas for five minutes, Ms. Jackson-Lee.

REP. JACKSON-LEE: Mr. Chairman, let me thank you very much and maybe I should say thank you, thank you, thank you, because as I have been briefed and listened to some of the questioning I respect greatly the interest and concern, and as I have lived through the legislative process in this nation I realize that we work through compromise. We work through collaboration. We seek a bipartisan solution, and as I know this new administration I think they have been the marker for bipartisan collaboration.

We're delighted to be able to work with the administration to get this right. We want to work with the industry of which a number of representatives will be on the second panel. But might I suggest, in the words of a wonderful icon of this nation, Dr. Martin Luther King, if not now then when. When are we going to wake up that we are only sitting on the fringes of a potential Bhopal?

How many times have we seen an incident and we speak to the words of we wish we could have, would have, and should have. The tragedy of 9/11 -- the horrific tragedy of 9/11 -- got us to thinking about aviation security. We began to analyze our border entry process and we made changes. The 3,000-plus souls lost their life.

Before Three Mile Island in the United States, how many of us thought about nuclear spills and the catastrophe that would happen through a nuclear plant? I don't know how many of us were focused. We lived with Three Mile Island. It was a neighbor of that community. Didn't expect anything to happen. So frankly, I want the industry of which I've had the pleasure of speaking before a number of organizations to call us to speak to you again because this has to happen.

The synergy and the timing is here and now. The chairman of the Energy and Commerce Committee is a original co-sponsor, myself, Mr. Markey, and Chairman Thompson, and frankly, it is now time to move on this legislation. We have worked for a period of time. I have visited particularly, Mr. Reitinger and Ms. Armstrong, wastewater plants sitting comfortably in the midst of residential neighborhoods and rural communities, seemingly tranquil and mild and unapproachable.

I've not been necessarily impressed with the security there because they don't think about those issues. But we in the Congress are the ones that are supposed to think about the security of America. We've got to be the forward-thinking individuals. So let me just pose these questions to both of you.

I noticed that the president extended his budget request -- a one-year extension was sought in the anticipation that Congress would act on a freestanding legislation for CFATS to make CFATS permanent. My question then is is the one-year extension to work with Congress so that we can act on a freestanding legislation to make CFATS permanent? Is that correct -- this one-year extension in the president's budget? Do you have that understanding?

MR. REITINGER: The one-year extension is to provide time to work with Congress -- for the department to work with Congress on a longer reauthorization.

REP. JACKSON-LEE: So we can collaborate. Let me quickly go to Ms. Armstrong. Do you have that understanding?

MS. ARMSTRONG: Yes, ma'am.

REP. JACKSON-LEE: Thank you. Let me quickly go to dealing with wastewater. There is a concern that this has had the effect of making an uneven security landscape, and I'm talking about the regulations under CFATS and the Marine Transportation Security Act.

If these facilities are included under CFATS, and I'm speaking of water and wastewater facilities or in the case of drinking water facilities regulated by EPA using a regulation similar to CFATS, can your office -- and I want both of you -- effectively coordinate and cooperate with the Coast Guard and the EPA to ensure that security grants are met without duplication or contradiction as is required in this bill?

It is important, especially in the case of the Marine Transportation Security Act facilities, that companies are not caught in between the Coast Guard and infrastructure protection and that they will continue to deal directly with the Coast Guard, that there be one face from DHS for security regulations for these facilities. Mr. Reitinger, you mentioned earlier you don't want to speak for the Coast Guard.

I don't ask you to speak for them but I want to know if we get this right -- if we get wastewater and water treatment in the bill working the way it should be can we expect from this administration a collaborative effort to make this work to secure America, Mr. Reitinger and Ms. Armstrong?

MR. REITINGER: So they're a little different. Let me respond to both of them, ma'am. With regard to working with the Coast Guard either under the existing regime or any follow-on regime, you can expect the National Protection and Programs Directorate to work effectively and cooperatively with the Coast Guard to ensure we are providing the most effective protections for the regulated facilities and not randomizing our stakeholders by working towards harmonization of regimes so we have a consistent level of protection.

With regard to the wastewater and water treatment facilities, you can expect us to work effectively with EPA. I think we both agree that there is a gap with regard to coverage of those types of facilities right now that needs to be addressed.

REP. JACKSON-LEE: Ms. Armstrong?

MS. ARMSTRONG: And I would just add that I take very seriously my responsibility to work within the department and with other federal agencies to harmonize regulatory programs.

REP. JACKSON-LEE: Mr. Chairman, (I just ask them ?) if we have this in this legislation can you work -- will you be working with those respective parties if this regulation -- if this language on wastewater and water get in this legislation or in this legislation?

MR. REITINGER: I apologize, ma'am. I thought I answered the question but let me be clear. Under the existing regime or on any following regime including this legislation we will work with those parties.

MS. ARMSTRONG: I agree. We're currently working with the Coast Guard actively and if we need to because of the provisions of this bill we will certainly work alongside EPA.

REP. JACKSON-LEE: Thank you, Mr. Chairman. I yield back.

REP. THOMPSON: Thank you very much. I thank our first panel of witnesses for their valuable testimony and the members for their questions. Before being dismissed, I'd remind our first panel of witnesses that the members of the committee may have additional questions for you and we will actually respond expeditiously in writing to those questions. Thank you very much. I now ask the clerk to prepare the witness table for our second panel of witnesses.

REP. PASCRELL: Okay. We're into the second panel. I want to welcome you all. First, Mr. Paul Baldauf -- Mr. Chairman, Ranking Member, it's my pleasure to introduce Mr. Baldauf. Serves as assistant director for Radiation Protection and Release Prevention, New Jersey Department of Environmental Protection. He's the assistant director and he manages three bureaus devoted to various aspects of radiation protection, one bureau charged with preventing the release of toxic and hazardous substances from industry.

These duties include a substantial role in the development and implementation of Homeland Security initiatives. He holds a B.S. degree in mechanical engineering from Pennsylvania State University, an M.S. -- a Master of Science degree in civil and environmental engineering from Rutgers University, correct?

I want to point out that is a very rare credential in that he has a M.A., Master's degree, in homeland security studies from the Naval Post-Graduate School, which is under sponsorship of the federal Department of Homeland Security. I think it's a testament to Paul's commitment to his work. Mr. Baldauf is also a licensed professional engineer in the states of New Jersey, New York, and in Pennsylvania.

The second witness will be Mr. Martin Durbin. Mr. Martin Durbin serves as the vice president of federal affairs for the American Chemical Council. During his tenure with the ACC, Mr. Durbin has served as the head of the site-, cyber-, and value-chain security for the business of (security ?). You must be very busy.

Our third witness is Dr. Neal Langerman. Dr. Langerman serves as the principal scientist and CEO for Advanced Chemical Safety Incorporated. His experience includes working with companies to improve chemical handling practices, developing emergency response teams, and upgrading industrial safety procedures. He has been a member of the American Chemical Society for 45 years.

And then fourth is the final witness -- will be Mr. Martin Jeppeson. Mr. Jeppeson serves as the director of regulatory affairs for the California Ammonia Company, the majority supplier of ammonia in California. His experience includes work on issues of safety, health, transportation, environmental issues in government, labor, and education. Without objection, the witnesses' full statements will be inserted in the record. We say that because we like it to speed up the process, if you want to summarize. I want to recognize Mr. Baldauf to summarize his statement for five minutes. Mr. Baldauf?

MR. BALDAUF: Thank you. Good morning, Chair, Ranking Member, and the committee members. It's an honor to testify here today. I'd like to focus my testimony on New Jersey's experience in implementing a homeland security program over the past six years with special attention to our requirement for inherently safer technology evaluation.

In a very quick summary, New Jersey adopted a security statute in October of 2001, formally adopted chemical sector best practices in September 2003, and formally adopted chemical standards in November of 2005. At this point, we have six years of on-the-ground experience implementing our best practices and standards for our universe of approximately 800 chemical facilities.

In addition, the Toxic Catastrophe Prevention Act, which regulates sites and storage of extraordinarily hazardous substances, are also required to conduct inherently safer technology analysis. IST analysis if you're subject to them you're required to evaluate reducing the amount of extraordinarily hazardous substances you have on site, substituting less hazardous materials if possible, using extraordinarily hazardous substances in a least hazardous process, condition, or form, and lastly, designing equipment and processes to minimize the potential for equipment failure or human error.

We have been extremely pleased over the years with the compliance levels we have seen to our standards. Initially, IST evaluation was required of 45 TCPA facilities out of a total universe of 157 chemical facilities that were subject to our standards. All 45 of those facilities conducted an IST evaluation. All those facilities documented having implemented some form of IST or similar risk- reduction initiatives over time.

Thirty-two percent provided a specific schedule for implementing additional IST. An additional 19 percent identified additional IST measures but have yet to submit implementation schedule. It's very clear to us that IST evaluation is not overly burdensome to the chemical sector and simply represents good business practice for any facility storing or utilizing extraordinarily hazardous materials from an economic, worker safety, and regulatory compliance standpoint.

In May 2008, the DEP took one additional regulatory step to require all companies subject to the TCPA program to evaluate IST. Beyond chemical plants, this rule covers additional sectors such as food, water, wastewater, refineries, and energy. Forty-two water, wastewater, food, petroleum, and energy facilities are required to submit an IST evaluation to the department by September of 2008. All of the 19 chemical reports evaluated to date were found to be deficient. The most common deficiencies include a failure to identify all potential IST alternatives and failure to provide justification for determination of an infeasible option.

IST in some form has been a practice in the chemical sector for many years but it is a relatively new concept to the other covered sectors. So we expect long-term compliance in the non-chemical sector areas to happen and they'll compare favorably, but there is going to be a lead time, we believe, to bringing these other sectors up to speed. Briefly, with respect to the Chemical Facility Anti-Terrorism Act of 2009, some comments. Section 2109, federal preemption, we fully support this language and states retain the unqualified authority to adopt enhanced security requirements based upon risk and consequence factors within their state.

The proposed act would capture chemical facilities currently exempt from the existing CFATS, expand the universe of regulated sites, and require assessments of methods to reduce the consequences of a terrorist attack at high-risk sites. Overall, the act addresses many of the comments previously submitted by New Jersey. One final policy point we'd like to respectfully make -- we strongly recommend consideration of permissive enabling language toward delegating oversight responsibility to state governments along with appropriate levels of federal funding to support homeland security efforts.

This is standard practice in the way most federal environmental laws have worked through the years where U.S. EPA or U.S. NRC may, at its discretion, delegate program implementation responsibility to qualified states. In our case, we have a maturing state oversight program already in place and, frankly, know our facilities are much better than DHS, in our opinion. We feel well qualified to undertake delegated responsibilities and would ask for consideration in adding such permissive authority to the draft bill.

I would like to once again thank the chairman, ranking member, and members of the committee for this opportunity to address you. We would be happy to entertain any questions you may have and are available at any time should additional information be valuable to the critical work of your committee. Thank you.

REP. PASCRELL: Thank you, Mr. Baldauf. Mr. Durbin?

MR. DURBIN: Thank you, Mr. Chairman, Ranking Member, and members of the committee. Thanks for the invitation to be here today to testify on this important topic on behalf of the American Chemistry Council. In short, security in all its dimensions is a top priority for ACC members, and our record of accomplishment, cooperation with Congress, DHS, other federal and state agencies is well established. Since 2001, ACC's member companies have invested $7.7 billion in security enhancements under our own responsible care security code.

The effectiveness of ACC's mandatory security program has been broadly recognized. In fact, our code not only provided a model for state-level chemical security programs in New Jersey and New York and Maryland but was deemed equivalent to the Coast Guard's Maritime Transportation Security Act. While we're understandably proud of our members' performance under the code, it is important to acknowledge that many non-ACC member companies out there have also taken aggressive action to enhance security through industry programs.

But turning to the DHS regulatory program, I believe CFATS is by far the most robust, comprehensive, and demanding chemical security program to date. CFATS is a strong regulatory program that takes an effective approach, set a high bar through performance-based standards, and then holds facilities accountable. This approach allows facilities to utilize a full range of potential security measures to address vulnerabilities identified by the department's assessment tool.

ACC not only called for the legislation that established these regulations but at each step of the process our member companies volunteered to pilot core program elements and assisted DHS in rapidly and successfully developing the tools needed to implement the program and meet the regulatory deadlines. DHS should be commended for the speed with which they've developed and implemented this comprehensive program, and DHS staff demonstrated outstanding commitment and effort. So we would urge Congress to provide the agency with the resources necessary to fully and quickly implement this important program.

The legislation being considered by this committee, we believe, represents an important step in making CFATS permanent. We're pleased to see that H.R. 2868 reflects many of the security measures that have been and will be implemented under CFATS, and we appreciate the efforts made to minimize duplication of effort by facilities that have already acted and will take further action under the program.

However, I'd like to highlight a few provisions that we've discussed with the committee where we continue to have questions and concerns. For example, we believe the provision that would give DHS authority to mandate methods to reduce consequences is unnecessary. Through its use of risk-based performance standards, CFATS essentially drives each facility to consider all possible risk reduction options when developing the site security plan, including methods to reduce consequences or inherently safer approaches. Further, the highest- risk facilities subject to CFATS have a strong incentive to implement security enhancements that could move the facility to a lower-risk tier or potentially even move it out of the program.

While you can't mandate innovation, CFATS allows DHS to unleash the ingenuity, expertise, and resources of the chemical sector. In addition, there's been much discussion already this morning, but we feel the provision that provides for citizen suits is both unnecessary and potentially counterproductive. Unlike on environmental statutes, CFATS is not a series of prescriptive statutory measures like emission standards or discharge limitations. It will therefore be difficult for a citizen or a judge to ascertain if a standard is being met or to decide what needs to be done to address an alleged deficiency. And we also share the agency's stated concern about the potential for disclosure of sensitive or classified information in judicial proceedings.

However, let me be clear that we fully support strong enforcement of the act. So we would, again, urge Congress to provide DHS with necessary staff and resources to ensure compliance. Now, while we have strong views on these issues, I want to acknowledge the willingness of both this committee and the Energy and Commerce Committee to seek our input and consider our viewpoint. We've had constructive discussions and I remain hopeful that our concerns can be addressed as the legislative process continues.

The crucial partnership between our industry and the federal government requires each of us to do our part. ACC and its member companies are committed to safeguarding our facilities and will continue to work with Congress and DHS in that spirit. Thank you.

REP. PASCRELL: Thank you, Mr. Durbin. Dr. Langerman?

MR. LANGERMAN: Thank you, Chairman Pascrell, Ranking Member, members of the committee. I'm Neal Langerman. I'm a Ph.D. chemist. I have 30 years experience as a consultant helping industrial clients handle chemical safety and regulatory issues. I have worked on these issues for 20 years through my professional organization, the American Chemical Society, a scientific and educational organization of 154,000 chemists and chemical engineers.

I would like to share the society's policy recommendations on the use of inherently safer technologies and on the regulation of research labs, and give an example to help put these recommendations in context. Inherently safer technologies are vital to the goals of Homeland Security to secure the nation's chemical infrastructure and safeguard against the consequences of terrorist attack. Achieving these goals requires research, development, technology investments. In particular, ACS has long advocated federal support of green chemistry research and development as a means to develop safer technologies. ACS has also been concerned about the role that regulations play in slowing down innovation, particularly in laboratory settings, when regulations intended for industrial settings are inappropriately applied.

For example, the proposed CFATS rule under the 2006 law unintentionally captured most research and academic laboratories into the Top-Screen process. The proposed legislation adds the requirement to assess inherent safety options at covered facilities. It should be noted that changing processes to eliminate inherent risk is only one of many approaches to achieve risk reduction. This application is complex and nuanced. Professionals in the real world context need to apply IST principles and processes where appropriate.

This can perhaps best be appreciated through a recently published example. In order to reduce the quantity of nitrogen oxide air pollutants emitted from a boiler, the design team chose an ammonia- based catalytic reducer to convert nitrogen oxide to nitrogen and water. The initial design proposed bringing liquid ammonia to the reactor through a 600-foot pipe. Ammonia is toxic if inhaled and inherent safety strategy suggested that a less hazardous solution of ammonia and water, also known as ammonium hydroxide, be substituted.

As the formal safety review proceeded, it was determined that ammonium hydroxide option had the potential to release 7,900 pounds of ammonia while the liquid ammonia process could only release 530 pounds. Further, the liquid ammonia process provided better overall operating efficiency. The design team ultimately concluded the original plan was the safer option. This example illustrates several issues for this committee to consider.

Existing internal process safety engineering programs and the existing regulatory structure provides strong incentives to examine and implement the safest possible options. The review of the design options in this example was conducted as part of the company's process hazard analysis. It met the requirements of the OSHA standard but was not driven by them.

The chemical enterprise has considerable experience advancing an inherent safety, training chemists and engineers of the concept, incorporating it into internal process safety management programs. Ideally, an IST approach is integrated into the original designs of a process though it can also be achieved when experts familiar with the plant modify existing technology. This distinction must be noted, as much of the proposed legislation's emphasis is on existing facilities, some constructed several decades ago.

Great care must be taken to ensure that the new processes do not create unrecognized health, safety, or environmental impacts. Careful application of IST options requires addressing modable (ph) technical issues including the volume and hazard of the materials and the frequency, consequence, and severity of potential releases. Considerable effort must also be expended to develop, scale up, test, and install new safer processes.

ACS believes that the most effective steps to further infrastructure protection will likely include incentives such as grants, tax incentives, preferential government purchasing, and award programs. The law must provide sufficient flexibility to both DHS and the regulated community to enhance security in an efficient and effective manner. I thank you for the opportunity to share these thoughts today and I look forward to answering your questions.

REP. PASCRELL: (Off mike.)

MR. JEPPESON: Thank you, Mr. Chairman, Ranking Member, and distinguished members of the committee. I'm Martin Jeppeson, director of regulatory affairs for the California Ammonia Company, CALAMCO, and I have worked there since 1996. Prior to that, I served in the United States Army and I retired as a lieutenant colonel in the Special Forces branch. Thank you all for the opportunity to provide you with my views and concerns regarding the Chemical Facility Anti-Terrorism Act of 2009.

CALAMCO is a member of the Fertilizer Institute and we are a nonprofit farmer cooperative made up of approximately 1,200 growers and fertilizer dealers throughout California. We specialize in providing nitrogen fertilizers such as anhydrous ammonia, ammonium hydroxide, and liquid ammonia nitrate to these agricultural entities. We are only one of two ammonia terminals in the state of California and we account for approximately 80 percent of all the ammonia used in California.

Fertilizer is essential to food production and it accounts for 40 to 60 percent of the food -- of the percent of the world's food supply. Because food production depletes the soil's nutrients, farmers really rely on fertilizer to keep the soil productive harvest after harvest. DHS's Chemical Facility Anti-Terrorism Standards, CFATS, regulates facilities that (possess ?) several fertilizers including anhydrous ammonia, ammonium hydroxide, ammonia nitrate, potassium nitrate, and sodium nitrate if threshold quantities are exceeded.

(The result ?) every aspect of the fertilizer industry falls under the DHS regulation -- manufacturer, wholesaler, retailer, and potentially, the farmer. This morning I'd like to focus my comments on inherently safer technology. We believe the requirements for all regulated facilities to assess the use of produce substitution, as proposed, could have a devastating impact on American agriculture. The chemistry behind the production of nitrogen fertilizer limits the manufacturer of options with regards to IST. Anhydrous ammonia must be produced before other nitrogen fertilizers can be produced.

As a result, there is no IST which could eliminate anhydrous ammonia at the manufacturing level. The applicability of these provisions to an agricultural retail operation is different, however. Their options are similar to those available to Calamco -- either switch to a safer product or reduce the quantity on site. Both options potentially remove several CFATs regulated products from the farmer's agronomic toolbox. Only with a broad understanding and analysis of the fertilizer supply chain can we conclude that it is not economically feasible to switch to alternative products.

An individual retailer may determine that is it feasible to switch from anhydrous ammonia or ammonium nitrate to an unregulated product such as urea, but it is unreasonable to assume that each regulated entity can adequately analyze the impact of their IST decisions on the rest of the fertilizer supply chain. Because of that, we believe it is the responsibility of this committee to understand and address the impact of these potential requirements.

As the Center for American Progress stated in its report entitled "Chemical Security 101", what you don't have can't leak or be blown up by terrorists. Similarly, in agriculture, what you don't have can't help you grow our nation's food supply. I'm also concerned about the impact of an ISD assessment on smaller businesses. It is unknown how the process described in Section 2111 will be implemented.

We anticipate that the team analyzing ISTs would require a chemical engineer, a process safety engineer and a legal and risk management perspective. While a manufacturing facility may have these individuals on staff, a facility such as Calamco that only employs 34 individuals, or a small agricultural retailer, will not. We anticipate that the cost to perform such assessment will be substantial.

Due to strong regulations by the Coast Guard, facilities regulated under MTSA were exempted by statute from CFAT's authorizing legislation. The current draft legislation acknowledges and maintains the Coast Guard's important role with regards to security, but we are distressed that facilities which have been successfully regulated, inspected and secured for more than five years, such as our facility in Stockton, would have additional requirements imposed by this legislation.

In closing, I would encourage the committee to simply re- authorize the existing regulations for a three year period and allow DHS to complete the first phase of implementation before altering the existing program. Thank you for allowing me to provide my perspectives on the legislation and I look forward to answering your questions.

REP. BILL PASCRESS, JR. (D-NJ): Thank you for your testimony. Without objection, the witness's full statements will be inserted in the record. So now, we're going to go to questions.

I have a question for Mr. Baldauf. As a member of the Homeland Security Committee, as well as a member of the Ways and Means Committee, I believe strongly that we need to implement rigorous security standards without unduly impeding commerce. I think you believe in the same thing. I've heard you speak before. But it could be a difficult balance to maintain.

The legislation we're considering today would implement a new, more stringent chemical security regime for the entire nation. We've often heard the refrain from the chemical industry that these standards would significantly restrict its ability to do business. Now, Mr. Baldauf, as was pointed earlier, in New Jersey, that that state has been implementing many of these chemical standards and security standards for years, including the assessment of inherently safer technologies, which we've heard mentioned a few times in the testimony of the gentlemen.

The chemical industry has vigorously opposed this in the past. As I mentioned before, there's 800 chemical facilities in New Jersey, 45 of them have extraordinarily hazardous materials. So, Mr. Baldauf, quite simply, has the ability of the chemical industry in New Jersey to do business really been stunted? That's my first question.

Has the sky fallen on the chemical industry in New Jersey since you implemented tougher chemical security standards, including IST? And then I have a follow up question. And when he's finished, gentlemen, jump in. This is a, we need to hear from everybody. This is not meant to be pedantic. Go ahead.

MR. BALDAUF: Thank you. We actually heard the same concerns in 2005 and 2008. In 2005 and 2008, we actually heard the same concerns before we enacted our standards and our IST rule. What experience has shown, since 2005 is no, it has not been overly burdensome for the chemical facility, the chemical sector, to comply with our standards and complete the IST evaluations.

And the main reason, I believe, for that is that on the IST evaluation side, there's a feasibility test. If it's not feasible to do the IST work, it's not going to be done. If it is feasible, then they can go forward and I think that's the key there. It's an evaluation we require and you have to meet a feasibility test to go forward.

REP. PASCRELL: (Inaudible) -- more efficient?

MR. BALDUAF: I don't think there's any question. I don't think there's any question.

REP. PASCRELL: Can you cite any specific cases that come to your mind?

MR. BALDAUF: Well, I think if you look at the IST reports that we've reviewed over the years, they pay very close attention to the types of chemicals they bring in, the timing, the frequency, the amount, and they stage things so they aren't in a position to have more than what they need on site at a given time. And that helps their bottom line in the long run also, and many times, because it's just by demand when necessary.

REP. PASCRELL: Would I be exaggerating if I said that the chemical industry in the state of New Jersey, which is one of the most robust in the entire nation, have been extremely cooperative with these standards?

MR. BALDAUF: I think we went through a very long process, and yes, I would --

REP. PASCRELL: Of course.

MR. BALDAUF: Like to say, it's a cooperative relationship we've had.

REP. PASCRELL: Just one more brief question before I turn it over to the ranking member. Just give me a brief summation of this feasibility that you've talked about and referred to in your testimony. This is very critical, I think, to the entire discussion of whether we should have stronger standards or weaker standards, or whatever.

MR. BALDAUF: Okay. How it works is it's up to the company, the facility, to explore the possible IST options that may be available to them, so they basically start with a clean slate, and they come up with, let's say for argument, ten things that are possible. And the feasibility goes through, is it economically feasible? Is it technologically feasible? Do you have space for it?

And there's multiple things that we include in the rule, and so at the end of the day, if you come up with ten things that are possible, you also come up with ten reasons why they are or are not feasible, and you make that argument back to us. And we review it to make sure that we agree with the steps taken in their evaluation.

REP. PASCRELL: And you, yes, Mr. Durbin.

MARTY DURBIN: If I could, because I --

REP. PASCRELL: Absolutely.

MR. DURBIN: Because I don't want to leave the impression here that the industry, at least speaking for ACC member companies, have been adversarial to what New Jersey has done or that we're on the other side.

REP. PASCRELL: No, your record's been pretty clear.

MR. DURBIN: And I think that for ACC members, and again, a lot of other non-ACC members as well, the idea of considering inherently safer approaches, again, is required as part of our responsible care security code. Because I think Mr. Baldauf, in his written statement, acknowledges the initial best practices in New Jersey were modeled on the responsible care security code and I will say, I believe we have a very cooperative relationship between the industry and the state. We have 70,000 employees in your state, as you said --

REP. PASCRELL: How many is that?

MR. DURBIN: Seventy thousand. And so we take our responsibility seriously and I think that it really does show some, there are some models here on how to move forward.

REP. PASCRELL: Mr. Langerman? Do you have any comment?

NEAL LANGERMAN: As I said, the ACS position is that inherent safer technology is certainly part of the overall process for reducing the inherent risk associated with the unit, which overall improves both safety and security. It's a holistic approach that requires a relatively high level of expertise to design and implement, and a relatively high level of expertise to review, if you will, at a state or a federal regulatory agency.

REP. PASCRELL: Mr. Langerman, do you know of any facility that would not be able to sustain operations as they exist right now if this legislation was passed? Yes or no?

MR. LANGERMAN: That's going to have to be answered on a, literally a case by case basis. There are facilities I have been involved with as a consultant in my professional career that would be hard pressed economically to make changes, and I certainly am aware of facilities that have chosen to move out of my home state of California because of regulatory oversight.

REP. PASCRELL: Okay. And that's the purpose of having feasibility. Mr. Jeppeson?

MR. JEPPESON: If you look at it from the --

REP. PASCRELL: Put your mike on, please. Thank you.

MR. JEPPESON: Sorry. If you look at it from the perspective of our particular facility, as I mentioned earlier on, there does not appear to be an (inaudible) for anhydrous ammonia, and if we were regulated out of that business, i.e. we had to get rid of the anhydrous ammonia, we would basically be out of business.

REP. PASCRELL: Anyone else? Thank you.

REP. DANIEL E. LUNGREN (R-CA): Thank you very much, Mr. Chairman.

With all due respect, Mr. Chairman, it's easy for us to ask whether a bill could legislate something out of existence. We have something going on in California now, as a result of federal law, interpretation by a federal judge, to protect the delta smelt. We have turned off the water to central California. We have some communities with as high as 40 percent unemployment right now.

We have some of the greatest farmland in the world now going dry because the United States federal government, with the Congress passing laws that wouldn't put anybody out of business, is having dire consequences, and we can't do anything because a federal judge has made a determination that the pumps have to go off and species homo- sapien is considered subservient to species that include the delta smelt.

So I am very, very concerned about the impact of federal legislation that we just grandly say will have no impact whatsoever. It sounds like we have found the magic bullet. We have found the holy grail. It is called IST. Inherently Safer Technology. Is that the answer to everything, Mr. Baldauf?

MR. BALDAUF: No, I would say it certainly isn't. In my opinion, IST is a process, one of many processes, that would help ensure that everything is being evaluated to get the facilities to a point where they're as safe as possible, but certainly it's not the final answer.

REP. LUNGREN: New Jersey does not mandate it, does it?

MR. BALDAUF: No, strictly evaluation.

REP. LUNGREN: Strictly evaluation.

MR. BALDAUF: Yes.

REP. LUNGREN: Which is different than mandating it under the authority of the Secretary of DHS. Mr. Durbin, your comments on IST.

MR. DURBIN: Again, we believe that IST is an important tool to be used as you're developing your site security plan. And it is a requirement under ACC's responsible care security code. And again, we, too, believe that it's not appropriate to mandate, that the decision is best left to the process safety chemical -- (inaudible).

REP. LUNGREN: Why isn't it the silver bullet?

MR. DURBIN: No, no, I didn't mean to say it was a silver bullet.

REP. LUNGREN: No, but why isn't it the silver bullet?

MR. DURBIN: Why isn't it?

REP. LUNGREN: Yeah.

MR. DURBIN: Because it doesn't --

REP. LUNGREN: It sounds great. Inherently safer technology. Who could be against inherently safer technology?

MR. DURBIN: well, it does sound great, and frankly, if you can institute those types of changes in your process, it is good business. It's good business in that it makes things more efficient, it makes things safer, what have you. But --

REP. LUNGREN: You don't have confidence that we, on the federal level, can mandate it in the circumstances that we think it ought to be mandated?

MR. DURBIN: Our view is that those decisions are best left to the security and process safety experts.

REP. LUNGREN: Dr. Langerman?

MR. LANGERMAN: First, let me thank you for defending the water. I live at the end of the water supply.

REP. LUNGREN: Well, you won't have to worry about getting wet.

MR. LANGERMAN: No. In fact, we're in a Stage 2 drought right now. You chose very good words in, is, in your question, is IST a silver bullet? Absolutely not. I would urge the members of this historic legislative body to look back to the history of the language, inherently safer technology. It traces back to a colleague, Trevor Kletz, in the U.K. who invoked it as one of a large group of engineering processes which, taken as a whole, can build into a process unit safety and, in fact, security, as a part of the unit. Not as a band-aid or an add-on.

Professor Kletz and all of my chemical and engineering colleagues who have worked on this, and myself, have recognized it's just one of the tools in a relatively rich toolbox that we can bring to bear, to make our units operate safer. The example that I gave in both my oral and my written testimony was chosen very carefully, because it points out a case in which all of our preliminary judgment said substitute, substitute, substitute.

And that seems to be what inherent safer technology focuses on, the language, where, when we did the detailed quantitative risk assessment, looked at the process in detail, and we did a consequence analysis, we got these amazing results, 7900 pound release that was possible when the alternative was implemented, versus 538 pound release if the original were implemented, which in fact, was the safer.

REP. LUNGREN: See, I remember when the federal government, the Congress, mandated MTBE as the additive to gasoline. We made the determination here that that needed to be used. What did we find out? MTBE turned out to be a disaster for the environment, almost ruining places like Lake Tahoe and other places, where it was used as gasoline and an additive when you had marine vehicles.

We're mandating corn based ethanol at greater and greater levels here on the federal government. And that's my concern, when we come up with an idea that came out of the industry, inherently safer technology, as a process, as one of the tools, and then we latch onto it and say, my God, we have found it, the holy grail and we're going to mandate it. And it will have devastating impact, in my judgment, if we go overboard with it. I thank the gentlemen for your testimony.

REP. PASCRELL: Does anyone else want to respond to what you've already heard?

MR. JEPPESON: If I may make a comment, sir? Talking about IST, let's just take for instance an example that if a farmer did have to switch from anhydrous ammonia to an alternative product. There are a number of costs involved in that to the farmer. We'll take a 1000 corn farm since you, sir, mentioned corn in your comments there. And given the current nitrogen costs around the markets, the result to that farmer would be an additional $15,000 of expenses, and those expenses would only be true if there were additional urea in the market place, in the supply chain, in order to provide that farmer with the product that he needed.

Currently, we're the largest importer of nitrogen fertilizer in the world. We're the second largest importer of urea, accounting for about 17 percent of the total world production. In our estimates, it would take an additional 7.6 million tons of urea to replace the ammonia that would not be used in order to get similar production levels, so that's about 116 percent increase in imports from the latest fiscal year of 2007-2008.

We think that that would probably drive the prices of urea sky high. And that's assuming that there's enough urea there to take the place of what is needed. And in order to get that additional urea, then obviously additional plants would have to be put into place. Yes, Mr. chairman?

REP. PASCRELL: Mr. Jeppeson, I just want to make it clear that in this legislation, the one we're talking about today, not the delta smelt. We're talking about a very specific legislation and you're bringing comparison of apples and oranges here. But in this particular legislation, nothing in this bill that I know of mandates any particular process. Nothing in the bill mandates any particular process. Anybody else have any comments?

Mr. Cleaver.

REP. EMMANUAL CLEAVER (D-MO): Thank you, Mr. Chairman.

I'm on the Financial Services Committee, used to be called the Banking Committee, and I painfully remember hearings like this a couple of years ago, as the ABA and others from the financial services industry argued that if we try to do any tightening of regulations that there would be unintended consequences, the world would essentially collapse and the Washington Nationals would win games. All kinds of --

REP. PASCRELL: Never happen, never.

REP. CLEAVER: Were going to go wrong. And so as a result, now that we have seen, we've walked to the precipice of a collapse of the world economy, and a part of the reason has been the failure to do, I think, Congressional responsibility in terms of regulations. I'm wondering, if something tragic should happen, who do you think will get the blame because we refused to take action on this legislation? How many of you would volunteer to say, well I stood up and asked them not to do anything?

MR. DURBIN: Mr. Cleaver, I'd answer it in a different way. I think we have stepped up and --

REP. CLEAVER: No, no, no, no. No. I appreciate what you're saying but before you say that, if you would answer my question. You said you'd answer it another way, but I'd like you to do it, if it's not. I'm not trying to be mean, but answer it the way I ask, which is, whether or not, who do you think will receive the blame?

MR. DURBIN: Likely we will.

REP. CLEAVER: Well, that's not quite the way I see it, based on history. I mean we would get beat up, as usual. I mean, we'd hear all the things about lobbyists and they control everything, and people would make decisions. Am I wrong?

MR. DURBIN: Well, again, if I could, I think this is a case where you, and I'm speaking for the American Chemistry Council, this is a group, and I am a lobbyist, so I'll go ahead and take the mantle there. I've come before this committee several times, and other committees, encouraging and supporting the passage of legislation to regulate chemical facilities for security. Thankfully, Congress did so in 2006.

I'm here today to say we want to make that program permanent, that is we want to continue to work with DHS. So I guess I look at it a little differently, that we're not starting from scratch. You know, we've got an industry that's already invested $8 billion in security and we want to make sure the program that's in place, being implemented now, is going to be even stronger.

This is a responsibility we all have, and frankly, we're never going to be done. We're going to have to continue to work at this and improve our ability to make sure that we can meet the threats that are out there. So I do understand what you're saying, but I think that we're in a better position, in that we do have a collaborative relationship here to actually address this concern.

REP. CLEAVER: Mr. Langerman, before you answer that question, let me, to follow up. The IST is sometimes dismissed as safety masquerading as security. I believe that if we're going to lower overall risk, which is usually defined as a product of threat times vulnerability times consequences, and that we should, Mr. Langerman, try to reduce each of these three, including consequences, if we're going to reduce overall risk. Do you agree with that?

MR. LANGERMAN: Thank you, Representative.

First, the American Chemical Society fully concurs with what Mr. Durbin has just stated, so I'm not going to repeat that. To address your follow up question, if I may, the process, the engineering process that runs under the mantle of inherently safer technologies is aimed at reducing the built in risk, the inherent risk of a unit, and by doing that, it improves both safety and security. So in that sense, I do concur with your statement.

REP. CLEAVER: Okay. My time has run out and I've got a lot more stuff, but I yield back, Mr. Chairman.

REP. PASCRELL: Thank you.

Mr. McCaul?

REP. MICHAEL T. McCAUL (R-TX): Thank you, Mr. Chairman.

I ask that the Chair recognize Dr. Broun for five minutes, as he has a competing hearing. and then perhaps go back to me.

REP. PASCRELL: The gentleman from Georgia is recognized.

REP. PAUL C. BROUN (R-GA): I thank Mr. McCaul for his indulgence in this, and I owe you one, sir (laughter) for the record.

Mr. Jeppeson, as a farmer, a former farmer, I understand that inherently safer technology requirements would significantly increase the cost for a majority of small businesses, such as agricultural retailers, specifically hiring consultants to form assessments, the cost of switching to more expensive but uncovered products, and increased insurance rates, et cetera. Wouldn't it be fair to say that some small businesses that are struggling with these increased compliance costs may be forced out of business?

MR. JEPPESON: I think, sir, that probably would be a good statement.

I think what might also happen is that those smaller retailers could very possibly switch away from those products that are more dangerous, if you will, and also go to much less costly products which may not serve the farmer quite as well. So I think there is a possibility that if they, if these assessments were imposed upon them, at a fairly large expense, there is a possibility some of them may go under.

REP. BROUN: I believe very firmly that if a nation can't feed itself, can't clothe itself, if it's not energy independent, it's not a secure nation. And as we go to these other modalities of trying to grow our crops, they're a whole lot more costly, and I think it's going to drive our foods costs up and make us more dependent upon foreign food sources, which I think is not in our best security interest as a nation.

So I agree with Mr. Lungren. I'm very concerned about the mandatory requirements that this legislation would cost. And I understand Mr. Cleaver's questions. But we cannot be totally risk free. And so, it's my understanding that the purpose of IST requirements is to increase facility safety, reducing the onsite volume of a covered chemical. But wouldn't reducing the onsite amount of a product result in increased truck, rail and barge traffic to ensure continued adequate supply.

Therefore, wouldn't these IST requirements merely shift the risks to other, perhaps, more vulnerable entities in the supply chain, resulting in only increased government regulation with additional protection from terrorist activities, and thus further increase the cost to everybody in America?

MR. JEPPESON: I think that's a very true position on that, sir. Take for instance, we have Product A, which is a dangerous product and we decide to replace it with Product B, but we need three times as much of Product B as we did of Product A to serve the farmer, and we're putting three times as many trucks on the road, three times as many rail cars on the rails, and three times as many ships on the high seas. So, yes, we are definitely increasing the risk there.

REP. BROUN: And then you're also increasing carbon emissions and all the things that the folks who are concerned about so-called climate change or global warming, have all increased, are talking about. So I thank the panel folk for coming and I appreciate you all's testimony.

And Mr. Chairman, I'll yield back the balance of my time. And I thank Mr. McCaul for his indulgence.

REP. PASCRELL: Thank you, gentleman from Georgia. Just one quick point. In the direct language of the, I wasn't sure, but now I am sure. The substance, the secretary, the Department of Homeland Security Secretary can require implementation of a high risk if it would significantly reduce the risk of death, injury, serious, adverse, et cetera, and is technically and economically feasible to be incorporated into the facility's operations and would not significantly impair the ability of the facility to sustain operation at its current location. A high risk facility that cannot comply with an implementation order is required to provide a written explanation to the secretary within 60 days of receipt.

Mr. McCaul, do you want to ask questions?

REP. McCAUL: Yes, Mr. Chairman.

REP. PASCRELL: All right.

REP. McCAUL: Let me just, for clarification, Mr. Baldauf, in New Jersey, you have an IST review process that seems to be working fairly well, but it's not a mandatory process. Is that correct?

MR. BALDAUF: It's mandatory that you have to do the evaluation, but the results of your evaluation, you're not required to implement them. So basically, at the end of the day, you have to put feasible alternatives on the table. But you aren't forced to implement any of them.

REP. McCAUL: So the implementation is not mandated --

MR. BALDUAF: Correct.

REP. McCAUL: Is what you're saying. Okay.

MR. BALDAUF: Correct.

REP. McCAUL: I just wanted to get clarification on that.

Mr. Durbin, I know you were quoted today in the B and A Daily, Environmental Reporter as saying that you'd like to make the IST provision more manageable for facilities to deal with. There's a Texas A&M report that talks about the subjectivity involved with IST. Do you agree? First of all, explain your quote, and then do you agree with the Texas A&M report that this is a very subjective standard?

MR. DURBIN: I haven't read the Texas report, but I do think, again, as I think I may have even been quoted there, that IST does require subjective decisions there. But, no, the point of my quote this morning, and you know, consistent with my testimony here today, we continue to believe that the provision is unnecessary, that the current regulations provide the encouragement.

In fact, it's eventually going to require you to consider all different types of security enhancements, including methods to reduce consequences, and that there's a strong incentive to implement those because you may end up putting yourself into a lower tier, or perhaps taking yourself out of the program. Having said that, the provision that's in the bill that was introduced yesterday, is essentially the same provision that was in the bill last year, which was approved by this committee. It's very similar to a provision that was in the bill in the previous Congress that was approved by this committee.

So, from a practical standpoint, if the committee is going to move forward with a provision that is going to give, allow, or give authority to DHS to mandate IST, we clearly would like to see changes to that provision to make sure that it is a more robust definition, that it entails risk and not just consequence, that it has a more robust process involved, both for the determination by the agency and for the facility's ability to appeal that process.

REP. PASCRELL: If the gentleman yields, one second --

REP. McCAUL: I'll yield to the chair.

REP. PASCRELL: Thank you. We have to make it clear, don't we Mr. Durbin, that this legislation does not prescribe a specific methodology.

MR. DURBIN: Correct. As I said, it provides the authority to the secretary. Correct.

REP. McCAUL: But to mandate. The current arrangement seems to be a cooperative arrangement between industry and the government, and actually seems to be working fairly well, according to your testimony.

MR. DURBIN: Absolutely. Now we're --

REP. McCAUL: In fact, the current president and current administration seem to think so, that they've asked this Congress to delay this for another year while they can work with the Congress on any further legislation. Is that correct?

MR. DURBIN: That's my understanding, based on --

REP. McCAUL: And we heard that testimony from the previous panel. I don't, Mr. Chairman, I don't know why we're not listening to the president in this instance, and the administration, instead of forcing this legislation upon the Congress. I think this is one instance where I agree with the president and the administration. I think it's a more reasonable approach to work with the industry on this and with the Congress in delaying this by one year.

Let me ask another question. Civil liability. This bill opens up the industry to civil lawsuits from, and DHS, uninjured parties, third party lawsuits. Mr. Durbin, can you comment upon the impact that could potentially have on, not only your industry, but on the information that should be protected?

MR. DURBIN: Well, as I mentioned in my testimony, we do share the concerns that the DHS expressed this morning, that, about the potential release of sensitive and classified information in judicial settings.

And I think, more broadly, and to your point and as others have noted this morning as well, success of a security regime here in a risk based program really does require an atmosphere of trust and collaboration between the DHS and the regulated community here. As I said, we in no way want to be perceived as apologizing for either a facility or the agency, if they're not complying with the regulations of the statute. However, we simply think that litigation is the wrong way to go about making sure that that occurs and succeeds.

REP. McCAUL: Well, and by opening this up to litigation, would that in any way damage the level of cooperation and trust between the industry and the government?

MR. DURBIN: That is one of our fears, that it would end up undermining that trust that we think really has been built, both, frankly at the state level and at the federal level.

REP. McCAUL: Mr. Jeppeson, last question, if I could indulge the chair. I know the Farm Bureau has come out openly against this bill. Can you elaborate on the impact this would have on all the farmers in my district and elsewhere?

MR. JEPPESON: I think from our facility perspective to start with, one of the concerns that we really have is the sharing of information as has been voiced by other members on the panel and homeland security people before. So, if the bill goes through as written, then we're required to share facility security plans and facility security assessments with people that we don't feel should be privy to that type of information.

As to the effect on the members of your district, sir, any changes in the costs from the manufacturer down to the distributors, such as a company like ours, to the transporters, down to the retailers, is obviously going to have an impact on the farmer, the end user. So, to answer your question, it's going to have an impact if there's an additional cost on the front end of it.

REP. McCAUL: And they're having a pretty tough time right now, from what I could gather.

So, I thank the Chair for indulging me.

REP. PASCRELL: The gentleman from Texas needs to be aware, I want to update him that the administration did have some question about the implementation, but was not knowledgeable at the time of the progress that we have made in negotiations with all the entities. So, as far as the administration, correct me if I'm wrong, staff. The administration is perfectly happy with moving along, if we have, all our eggs in place.

REP. McCAUL: Will the gentleman yield?

REP. PASCRELL: Sure.

REP. McCAUL: The testimony we heard from the prior panel, from representatives from the Department of Homeland Security, stated that they, in fact they specifically said that a one year extension would be in the best interest.

REP. PASCRELL: Well --

REP. McCAUL: And the administration --

REP. PASCRELL: Well the Congress proposes and the executive disposes, so that's where we are at this particular time.

REP. MARK E. SOUDER (R-IN): And in all fairness, they've only had two days to look at it.

I wanted to put into the record a couple of things just for clarification, because when doing apples to apples, the earlier example, the American banking industry was regulated and that 60 percent wasn't the part of the problem. It was the 40 percent that didn't have any regulations at all, the non-bank sector, and the banks that got into the non-bank sector. Here, we have a regulated sector and we're more like, in the bank industry, arguing about how regulated they should be, not whether they should be like the non-banks that caused the financial sector problems.

Secondly, Mr. Lungren almost convinced me that maybe, because I like ethanol, almost convinced me that maybe the government should do regulation, but I'll try to hang loose here and not get into an ethanol debate. The third kind of question I wanted to get into here was this process of, I thought Mr. Langerman made a good point. Unless we're going to, and let me ask Mr. Baldauf. If New Jersey recommends to a company that this is a process that could in fact save you money, that's presumably over the life of the process?

MR. BALDAUF: Yes.

REP. SOUDER: Do you take into consideration whether that company has the cash to do it? Mr. Langerman made a very, or Dr. Langerman, made a very good point here, is that sometimes the process, because I know we have an assumption right now, it seems to be the new trend, that government knows more about business than business, but that aside, that sometimes things don't appear the way they are, whether it's the whole layout of the building, whether it's the mix of the processes as confidential, but there's another.

Unless we're going to set up a tarp program to fund IST, part of the challenges right now for the more marginal companies is, is part of the feasibility question, whether they have the cash, because long term doesn't matter. Because, by the way, in the bill, the only thing it says is the owner of the chemical facility to continue in business. It doesn't say whether, lose money, gradually go out, put yourself in a riskier position. This says continue in business.

REP. PASCRELL: Will the gentleman let the witness answer the question, and I want to refer you to Section 2111, which talks specifically about the costs and the technical liability. It's in the bill.

MR. BALDAUF: In New Jersey's experience, we in no way, shape or form recommend IST options or force them on a company. It's possible, if we're aware that Company B does something in a different state, you should look into this, but we would not force it or recommend it. However, if it was on the company's list of recommendations and the company came to us and said, feasibly, this is going to put us out of business, we can't afford it --

REP. SOUDER: I didn't say, necessarily, put out of business, I said further cash strap them. In the question of feasibility, because long term returns. I was in the retail furniture business, and people would walk in and go improve your lighting, it'll increase your sales. Improve your radio advertising, increase your sales. Improve your distribution, painting on the trucks, it'll, do them all or you'll go out of business. And the challenge here is that, is infeasibility, not whether they're going to go out of business, but what other tradeoffs they have, is this really essential to the security of it? Is it just kind of like a preference somebody has? Is it, what's the marginal potential gain versus the cost of the industry?

Not whether they're going to go out of business, but, in the range of things they're doing, in the competitive and international business, things that Mr. Jeppeson raised in the tradeoffs that farmers yield at the end use of the product. By the way, just technically, this doesn't cover transportation, so just in time inventory may be better for the company in saving costs, but we're putting more anhydrous ammonia or whatever the chemical is, on the road more times.

You don't even have jurisdiction to cover that. But my specific question is infeasibility, do you look at the question of not whether they're going out of business, but cash flow questions, management questions as to timing, implementation versus gain.

MR. BALDAUF: The answer --

REP. SOUDER: You're not mandating it, you're --

MR. BALDAUF: The answer --

REP. PASCRELL: Can I read that section of the bill, please, before you answer?

REP. SOUDER: If we pass the bill, can I do my language --

REP. PASCRELL: No, you've answered. Now I'll read the bill to you.

REP. SOUDER: Then we can --

REP. PASCRELL: It's obvious you didn't read it. Go ahead.

MR. BALDAUF: The answer is yes to about, if you look at all those areas and we're looking at the feasibility, and from our experience, the facilities that have done IST at their site as a part of our review, to our knowledge, have not put themselves in a competitive disadvantage between of IST options they've implanted since our rules came in place.

REP. SOUDER: Would you agree, is this true that only 45 of the 157 chemical companies in New Jersey are, in other words, you've done a risk assessment rather than doing this with every company?

MR.BALDAUF: Risk assessment, and IST evaluation with the 45 chemical ones that were done, where 42 additional TCBA sites are doing the IST evaluations now, so it'll be a total of 87 IST evaluations done in the state at site.

REP. SOUDER: And how did you determine which ones did and didn't?

MR. BALDAUF: They were the high risk. They were the ones in our toxic statue prevention program, our state version of EPA's 112(r) program.

REP. SOUDER: So, in the state of New Jersey, which is being held up as a model here, about half will eventually, at some point, be targeted because you're doing a risk assessment. You don't make mandatory recommendations. You don't have the Department of Homeland Security making arbitrary decisions, then letting the company appeal and the judge and jury is the Department of Homeland Security. You try to limit, as a state model, that really isn't what this bill is doing. Furthermore, would you like to allow civil lawsuits in New Jersey? Do you think that would be helpful?

MR. BALDAUF: The way

REP. SOUDER: Would you like to be sued?

MR. BALDAUF: The way, TCPA is delegated from EPA. EPA has that citizens' suit language in it. It has, tracks pretty close, I'm not a lawyer, but it seems to track pretty close, and TCPA over the almost the 20 some years we've had it, we haven't had instance where the citizens' group was, we got to that point.

REP. PASCRELL: So in other words, we have time, time is up. We're going to go to vote. But in other words, Mr. Baldauf, there has not been a flood of litigation in the state of New Jersey. True or false?

MR. BALDAUF: I can speak for the TCPA program, and that's true. There has not been.

REP. PASCRELL: Thank you. The committee has received --

REP. SOUDER: Mr. --

REP. PASCRELL: Written testimony --

REP. SOUDER: You asked a question that contradicts some of my testimony. May I --

REP. PASCRELL: Go right ahead.

REP. SOUDER: That the question, as I understood it, you said you had delegated potential lawsuits coming off the EPA. There is not a statute that says they can sue you directly. It's a presumed. Right?

MR. BALDAUF: That's correct.

REP. SOUDER: Yeah.

REP. PASCRELL: There hasn't been. There hasn't been. Period. We're talking about how many years? Twenty?

MR. BALDAUF: Since 1986.

REP. SOUDER: He doesn't have a clause in the bill that says they can sue them. He's presuming that it's delegated, that attorneys would have to go through their EPA designated transferred authority, which is --

REP. PASCRELL: My friend from Indiana, are you finished?

REP. SOUDER: Yes.

REP. PASCRELL: Thank you.

The committee has received written testimony from Greenpeace. Without objection, it will be added the hearing record. I'm hearing no objections. So ordered.

I thank all our witnesses for their very valuable testimony, and the members for all of their questions. I would remind our second panel of witnesses that the members of this committee may have additional questions for you and we'll ask you to respond expeditiously in writing to those questions.

There being no further business, the committee stands adjourned. Thank you very much.


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