Hearings - Statement
 
Statement of George V. Voinovich
Hearing: Full Committee Hearing
A legislative hearing on S. 1772, “The Gas Price Act of 2005.”
Tuesday, October 18, 2005

Mr. Chairman, thank you for holding this hearing, and thanks to all the witnesses for providing testimony to the Committee.

 

Since late 2002, gasoline prices have been extremely volatile. Record gasoline prices continue to prompt 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 this year. Inflated gasoline prices harm 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 county due to increased transportation costs.

Mr. Chairman, when our constituents are hurting financially, we have to make sure that we are correctly responding to high gasoline prices when we formulate legislation. We need to be sure we are promoting sound policies that promote conservation, expand fuel supply and protect the environment. And we need to be sure that we are not asking constituents to make unwise program investments and pay for those programs in the form of higher taxes when their budgets are already strained.

I look forward to hearing the testimony of the witnesses, Mr. Chairman, but I have grave fiscal and environmental concerns about this legislation. I am not yet convinced that the record shows that environmental permitting is the reason for a lack of refinery capacity, not am I convinced that relaxing our environmental laws will do anything to lower gasoline prices, in either the short term or the long term. I am, however, convinced that changing our environmental laws is likely to lead to increased pollution at the expense of public health, a result I cannot support.

I would first ask whether there a need for this legislation and will it solve the problem it seeks to address, which is high gas prices. I would submit that the answer to both these questions is no. As an initial matter, S. 1772 repeals or modifies several sections of the new energy law that were just enacted earlier this year, including sections on refinery revitalization, and loan guarantees for refineries making gasoline and diesel, including Fischer-Tropsch fuels. How are we to know that these provisions have not worked, when they are a little more than two months old?

For instance, we gave these same Fisher-Tropsch fuels a 50 cent per gallon fuel blenders credit in the new highway bill. Now we are proposing to give an additional $1.5 billion dollars in loan guarantees to these technologies and additional Economic Development Administration grant funds to cover assessment and infrastructure costs of developing refineries on former military installations. We currently have a clear process for re-use of military bases, and for providing assistance to communities that seek to economically reuse those sites. Instead of reinventing the wheel, we should be urging federal agencies to implement these laws and provide the assistance and incentives we have just put into the law, rather than rushing to change programs again midstream.

I also am concerned, Mr. Chairman, that this bill makes additional changes to the Clean Air Act in the name of addressing boutique fuels. These changes go beyond those in our new energy law. This bill exempts states that have received fuel waivers from accounting for any resulting air pollution under the Clean Air Act. It also provides a mechanism for further reducing the number of boutique fuels, without taking into account what we have done in the new energy law as well. These new changes could result in reducing the options for states to meet air quality goals, at a time when the number of new fuel blends is decreasing anyway. In June 2005, the Government Accountability Office issued a report examining the country’s boutique fuels situation, before the energy bill became law. Of the 11 specialty gasoline blends they examined, four blends were eliminated by the energy bill and the Tier II sulfur cap. We’ve already eliminated a third of the fuels that were being sold in the summer of 2004, and the energy bill provisions may result in more reductions. This hardly seems the time for change, Mr. Chairman.

The bill also revises the consensus refinery revitalization provisions in the new energy law and puts new permitting deadlines for participating states in its place: 270-days for new refineries and 90-days for refinery expansion. It would make far reaching and unexamined changes in the delicate federal-state structure of judicial review set forth in our environmental laws, by requiring all permits, whether issued pursuant to federal or state law, to be reviewed in Federal District Court. In some cases, it would actually create an additional step for judicial review, while in others, it would override provisions of environmental law that require state court review. These sweeping changes could actually provide a predicate for additional litigation and delay with regard to refinery permits and make it harder for states and localities to participate in the permitting process.

It is my hope that we can get to the heart of some of these issues today. If we don’t Mr. Chairman, I fear that the harm to our constituents of these high prices may include unjustified repeal or revision of our federal environmental laws on top of the highest gas prices in history. Our nation’s environmental laws are not to blame for the current price of gasoline. These are important laws, important for the health of our citizens and our environment. Waiving and altering them wholesale for uncertain benefits is adding insult to injury, especially at a time when the oil industry is making record profits.

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, 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. Most experts believe the high price of crude oil and the high refining margins are the principal components of increased gasoline prices. 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 continue to report record high profits for the oil industry. For example, the Washington Post reported on September 25, 2005 that when the average price of a gallon of regular gasoline peaked at $3.07 recently, it was partly because the nation's refineries were getting an estimated 99 cents on each gallon sold. That was more than three times the amount they earned a year ago when regular unleaded was selling for $1.87.

These are very high profits, much higher than those in other sectors of our economy. And those profits have been made both with the current environmental regulations in place, and when environmental waivers were granted after Hurricanes Katrina and Rita. 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.

Thank you again, Mr. Chairman for holding this hearing. I look forward to hearing from the witnesses.

 

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