The purpose of today’s hearing is to consider S. 1772, the Gas Petroleum Refiner Improvement and Community Empowerment or Gas PRICE Act.
The Gas PRICE Act is not some knee-jerk reaction to the recent hurricanes. Rather, S. 1772 builds on the Committee’s consideration of issues facing the refining sector since its hearing in May 2004. The fact that the hurricanes shut down one third of U.S. refining capacity did however, highlight what many objective, non-partisan experts have concluded some time ago – the U.S. lacks sufficient refining capacity to make the clean transportation fuels the public demands, and tight capacity translates to significantly higher prices at the pump.
The issue is not solely a U.S. challenge; rather insufficient refining capacity is a global problem. Even Federal Reserve Chairman Alan Greenspan stated as much in a May 20, 2005 speech.
This chart from the energy experts at ICF Consulting depicts global refinery trends. The relatively stable blue and pink lines depict how global demand and global refining capacity are nearly equal. The sharp downward curve shows globally surplus capacity.
The erosion of domestic refining capacity is an erosion of national and economic security. Failing to promote increased domestic refining capacity means that the U.S. is relying on other countries for its gasoline and home heating oil. Today, 25 percent of the East Coast’s supply is imported.
So what are we going to do about it? Congress cannot make new refineries spring up over night, states have a primary role in permitting the facilities, and we shouldn’t mandate the use of certain fuels where residents don’t want them.
The Gas PRICE Act responds to the facts; it supports and assists states in meeting their own objectives that will benefit us all. I am extremely troubled that a critic chose to make sensational, baseless assertions rather than read the text of the legislation before this Committee. As Sir Winston Churchill said, “Truth is incontrovertible, ignorance can deride it, panic may resent it, malice may destroy it, but there it is.”
The Gas PRICE Act first directs the Economic Development Administration to provide additional resources to communities (not to industry as some claim) facing BRAC-related job loss to consider building refineries on those sites. Refineries are not just a good source of local high paying jobs, but are in the nation’s interest.
Second, states have a significant role in permitting existing or new refineries yet they face particular technical and financial constraints when faced with these extremely complex facilities. Therefore, the bill establishes a Governor opt-in program that requires the Administrator to coordinate and concurrently review all permits with the relevant State agencies. This voluntary program does not waive or modify any environmental law, but assists States and consumers by providing greater certainty in the permitting process.
Third, natural gas prices this winter are projected to increase 75 percent. The Gas PRICE Act increases efficiency by providing grants to identify and use methane emission reduction through EPA’s Natural Gas Star Program; and it requires the EPA to conduct methane emission reduction workshops for state officials.
Fourth, the recent hurricanes forced EPA to invoke new authority under EPACT 2005 to ensure that consumers get the fuel they desperately need. S. 1772 simply clarifies that states acting pursuant to a federal emergency waiver will be held harmless. Additionally, bi-partisan Senators have sought to reduce the number of boutique fuels to promote greater supply stability. Yet, boutique fuels address environmental needs of each region. Therefore, I have proposed a cautious approach that will reduce fuel blends pursuant to the environmental and consumer preferences in each State.
Fifth, policymakers, businesses, and the public have struggled to balance increased demand for transportation fuels with improved environmental quality while keeping prices low at the pump. Most “solutions” have focused on technologies that may not be realized for decades or other measures that would hurt U.S. manufacturers.
As Montana’s Governor Schweitzer wrote in a New York Times op-ed titled, “The Other Black Gold,” syn-fuels are a part of the answer. These fuels use petroleum coke, a refining waste or byproduct, or domestic coal to produce ultra-clean, virtually sulfur free diesel or jet fuel, and are price competitive at $35/ barrel of oil.
The Gas PRICE Act requires EPA to establish a demonstration project evaluating the use of these fuels as an emission control strategy, and authorizes EPA to issue up to two loan guarantees designed to promote private sector response. Promoting domestic ways to reduce U.S. oil dependence is an important goal; a goal that 85 Senators, including nearly every member of this Committee voted for in passing the historic Renewable Fuels Standard in the recent Energy Bill.
The choice is clear: increase refining capacity and develop new domestic sources to meet U.S. needs or maintain the status quo, which as ICF Consulting concluded in its summer 2005 report means “a world of higher prices, supply shortages, and slower global economic growth.”
The Gas PRICE Act is a very reasonable step toward breaking the status quo by empowering participating states and local communities, increasing efficiency of natural gas, and establishing new programs to develop ultra-clean domestic fuels to benefit U.S. motorists and businesses. I look forward to hearing from our witnesses.