U.S. Senate Committee on Environment & Public Works
U.S. Senate Committee on Environment & Public Works
Hearing Statements
Date:   05/12/2004
 
Statement of Senator James M. Jeffords
Environmental Regulations in Oil Refining

The Committee will be examining several very important issues today, as we take testimony on the environmental regulatory framework affecting oil refining and gasoline policy.

Since late 2002, gasoline prices have been extremely volatile, with the national average spiking above $1.70 three times. But, gasoline prices have been record breaking in recent days, and so have the calls for quick federal action. I am certain that every member of this Committee has heard from their constituents about gas prices. The nationwide pump price for regular gasoline has set a new record, exceeding $1.75 per gallon. Inflated gasolining pricing harms our constituents in several ways: it takes dollars from their pocketbooks; and it raises the prices of the other goods and services needed by families in Vermont and across the country due to increased transportation costs.

I’m concerned, Mr. Chairman, that the other harm to our constituents of these high prices may be in the form of premature calls to repeal or revise our federal environmental laws. This hearing’s very title makes the unfounded assumption that our nation’s environmental laws are to blame for the current price of gasoline. These are important laws, important for the health of our citizens and our environment.

These laws and their regulations have dramatically reduced harmful emissions from motor vehicles by removing lead and sulfur, adding catalytic converters, and specifying specific performance requirements for both vehicles and fuels. They also require refining facilities to modernize their pollution control equipment at certain times so they do not worsen local air quality.

While compliance with these laws has imposed some financial costs, it has also achieved real benefits well in excess of the costs to refiners or at the pump. In fact, according to EPA’s announcement yesterday, they indicate that the public health benefits of the new rule to reduce sulfur in diesel for non-road, heavy-duty engines will be 40 times the cost of implementing the rule. This same pattern exists for many of the fuel and pollution controls that the nation has adopted so far.

Whatever contribution the costs of environmental compliance and the manufacturing of fuels that meet the requirements of the Clean Air Act have made to the overall price of gasoline, I am very skeptical that these costs are a primary driver behind the recent price fluctuations we have seen.

We routinely implement our environmental laws in a deliberate and measured way. In the case of Clean Air Act compliant motor fuels, all of them have been phased-in over long time frames in consultation with industry. We have done this specifically to try to avoid market shocks and price spikes. These are not new requirements, they are not a surprise, and the costs associated with meeting them are known.

Mr. Chairman, it also appears that the financial resources to meet these requirements are available. Major newspapers across the country have reported very high first quarter profits for the oil industry. For example, USA Today reported on April 29, 2004 that ConocoPhillips, the third largest U.S. oil company, reported first-quarter earnings of 1.6 billion dollars, up 33% from 1.2 billion dollars in the first quarter last year. BP reported similar profits. Both companies cited higher prices for their products and higher profits on refining as one of the reasons for this increase.

These are very high profits, much higher than those in other sectors of our economy. And those profits have been made with the current environmental regulations in place. During this hearing, I will be listening closely for any documented, real-world evidence that witnesses may have to show that environmental regulations are actually contributing to increases in gasoline prices in any significant way.

But, there is one thing that we do know with certainty, our country’s voracious appetite for petroleum is continuing to cause environmental and national security problems. We cannot ignore the health and environmental consequences of our growing oil consumption. We owe it to our children to reduce our appetite now and find new, cleaner and, if possible, renewable fuels to keep our transportation sector strong.