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

Thank you, Mr Chairman. I commend your leadership in drafting this important legislation and bringing it in front of this committee for a hearing. I believe that passing this legislation is another important step in helping our nation reduce its dependence on foreign sources of energy. Conservation must be an important component of our energy policy, but it cannot be the only component. We simply cannot conserve our way to energy independence.

 

The simple fact of the matter is that our nation’s energy supplies are not keeping up with demand. This situation has been further exacerbated by the recent hurricanes of Katrina and Rita, which shut down a dozen refineries and disrupted a fifth of our nation’s gasoline supply.

One of the main reasons why our nation’s supply of energy is not keeping pace with demand and causing higher prices is due to the lack of refining capacity. The last oil refinery built in the U.S. was almost 30 years ago. According to the Wall Street Journal, in 1981, there were 125 refineries in the U.S. with a capacity of 18.6 million barrels a day. Today, there are 148 refineries with a capacity of 16.8 million barrels per day–this despite the fact that US demand for gasoline has increased more than 20%.

A big reason for the lack of refining capacity is because, over the years, we have created a regulatory climate that has made it extraordinarily difficult and costly to build new refineries. The permitting process for building these new refineries along with the all of the court challenges can take years to accomplish. One such company in Arizona that intends to build a new refinery has been trying for almost ten years. These delays, in turn, drive up costs so much that constructing the refinery becomes economically infeasible.

I believe S. 1772 takes an important step forward in streamlining the permitting process for new refineries. Specifically, Title II of the establishes an opt-in program for state governors requiring the EPA to coordinate all necessary permits for the construction or expansion of refineries. It also provides participating states with technical and financial resources to assist in permitting and establishes deadlines for permit approval. The bill does this without changing or modifying any existing laws. I am also pleased that the bill provides economic development incentives for building refineries at BRAC sites. Finally, the bill establishes demonstration projects for future fuels (diesel and jet fuel) as an emission control strategy, and holds states harmless for acting pursuant to the emergency waivers under EPACT 2005's Sec 1541.

While I very much support this bill, I believe that it is absolutely critical that coal-based refineries be included in as part of the definition of “refinery” in this bill. The definition of refinery should be amended to include refineries that can use coal as feedstock. There are over 250 billion tons of recoverable coal reserves in the U.S., which is equivalent to an estimated 800 billion barrels of oil. Saudi Arabia has reserves of roughly 260 billion barrels of oil. Coal already provides more than half of the nation’s electricity and is the largest single source of energy production at more than 31% of the total. Coal can be converted, through proven existing modern technology, into clean, zero sulphur synthetic oil and oil products at roughly $35 per barrel compared to $67 per barrel of oil.

Coal liquefaction or coal to liquid refineries can be located anywhere that coal is produced. This proven technology can produce clean transportation fuels using domestic coal; thereby expanding our supply of transportation fuels while decreasing our dependence on foreign sources of energy. This includes gasoline, diesel and other liquid fuels. The great thing about coal refined diesel fuel is that it will now be low in sulphur–it will come out cleaner, enable refiners meet their clean-air requirements and help the public lead healthier lives.

Unfortunately, much like oil refineries, there are serious impediments to constructing coal to liquid plants. One reason is that the front end cost of construction for these plants is very high. According to the National Mining Association, capital costs for constructing a 10,000 barrel per day plant can range between $600-700 million. Furthermore, the lead time for a coal refinery, as with most refineries is usually a minimum of five to seven years even under the best circumstances.

The existing obstacles to deploying coal to liquid technologies are challenging. Like the oil industry, the coal mining industry faces numerous permit requirements, permit challenges and repeated appeals. As with oil refinery permitting, the delays in this process can drive up costs and make constructing coal- based or coal to liquid plants economically infeasible.

That is why I believe that it is imperative to give the same incentives and protection for coal to liquid refineries that are provided to petroleum refineries under S.1772. According to the Energy Information Agency(EIA), the U.S. now depends on foreign sources of petroleum for 56% of its needs. The EIA estimates that this share will increase to 70% by 2025 if nothing changes. With our nation’s abundant supply of domestic coal, increasing dependence on foreign sources of energy, and our urgent need for reliable and affordable supplies of fuel; I believe we should be promoting the deployment of coal to liquid refineries. Including coal based and coal to liquid refineries in S. 1772 would be positive step in this direction.

Thank You, Mr. Chairman, and I ask that my remarks be included in the record

 

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