U.S. Senate Committee on Environment & Public Works
U.S. Senate Committee on Environment & Public Works
Hearing Statements
Date:   03/20/2003
Sen. James M. Inhofe, of Oklahoma
Alternative fuels and fuel additives

On October 5, 1999, as chairman of this subcommittee, I held a hearing on “EPA's Blue Ribbon Panel findings on the fuel additive, MTBE.” In that hearing, I said that, “[T]he safeguarding of the nationwide supply and distribution of gasoline must be a key consideration in any action that is taken to address MTBE.” This statement has never been truer than it is today.

I firmly believe that one of our largest national security problems is our energy dependence on foreign countries. And many agree, including Deputy Secretary of Defense Paul Wolfowitz, who has called our energy dependence “a serious strategic issue.”

Any fuels deal that is part of the energy bill should reduce our dependence on states like Iraq. Again, it is not only an economic issue but it is also a national security issue. Now, I understand that many here today worked hard to move the ball forward, and I applaud them for their efforts. Nevertheless, with all of that in mind, there are some fundamental concerns that I have with the fuels deal that was part of the energy bill last year, including (but not limited to):

1. The impact of the fuels deal on small refiners: While I understand that many large refineries are happy with this “deal,” I know that many small refineries are unhappy. Our domestic refineries are running at almost 100% capacity. Therefore, we cannot afford to lose any refineries. I will not support legislation that could hurt our refining capacity. I would like to submit a letter for the record from a number of small refiners, expressing concerns about the impacts of the fuels deal on them.

2. The potential impacts of the fuels deal on the supply, and therefore price of fuel for the American people: The implementation of a fuels deal must not cause California’s current gas prices to become the norm for our nation – the economic and national security implications are just too great. For example, I have serious reservations about the impact of banning MTBE on supply. Additionally, the National Association of Convenience Stores and The Society of Independent Gasoline Marketers of America have prepared testimony, which I would like to have submitted into the record. In their testimony, these organizations put forward changes to last year’s fuel deal, which “will reduce balkanization, reduce gasoline supply disruptions, reduce wholesale and retail price volatility, and expand the sources of supply many retailers can access.” I want to strongly consider their proposals.

3. The agreement last year is that an ethanol mandate is to be phased in over ten years. I want make sure that agreement stands. I will not support a more aggressive implementation of the ethanol mandate.

4. As a matter of fairness, we must take a close look at safe harbors for congressionally mandated products, such as MTBE and ethanol.

5. The impacts of the fuels deal on the Highway Trust Fund: Under the fuels deal, ethanol is getting a subsidized guaranteed market – a mandate – of 5 billion gallons over ten years. As a conservative, this does not sit well with me at all. As the Chairman of this Committee, it is even more troubling. Why? Because the ethanol subsidy comes right out of the Highway Trust Fund. Over the next few months, this Committee is going to have the entire U.S. Senate trying to get their fair share of highway dollars. As it stands, this fuels deal significantly shrinks the pot of money that this Committee has to spend for highway projects. The highway trust fund issue MUST be addressed.

Again, I thank the Chairman for holding this hearing, and look forward to developing sound energy policies, which ensure the strength of our economic and national security.