406 Dirksen EPW Hearing Room

Shawn Mitchell

Colorado State Senator

Thank you Chairman Inhofe and Senator Jeffords for providing the State of Colorado with the opportunity to testify on the Gas PRICE Act today.


My state strongly supports this legislation and we hope that the committee and the full Senate will pass the bill to provide incentives to states to expand existing and permit new refinery capacity in a fashion that would protect the environment while simplifying the permitting process to prevent delays for necessary projects.

This issue before us today is one we’ve been grappling with for some time, as you noted in your hearing back in 2004. It is ever so more important now given the vulnerabilities exposed by Hurricane Katrina and the shortsightedness in essentially restricting the majority of the nation’s refinery capacity to the Gulf Coast region. I understand that 47 percent of our refining capacity and 28 percent of our oil production is concentrated in the Gulf Region and when Hurricane Katrina hit, we experienced significant price increases because of reduced supply. We’re speaking in terms of a matter of days, though there is surely a long-term impact that I will touch on.

Obviously, any incentive that can be provided to increase refinery capacity will benefit the country as a whole. Colorado’s support for your legislation, Mr. Chairman, is based upon the incentives it would provide for states to expand capacity.

The Gas PRICE Act provides incentives through the Economic Development Administration to those parts of the country that are impacted by the Base Closure and Realignment Commission (BRAC) designations. While my state was not negatively impacted by the most recent BRAC process, we have had military facilities in Colorado that were closed in the past and I we know from experience those impacts can be difficult to overcome.

Fortunately, in Colorado we have managed to deal with base closures in a fashion that has resulted in economic development. For example, the former Lowry Air Force Base in Denver has been cleaned up and returned to productive civilian use as a residential neighborhood. We were blessed in that case that Lowry is close to the metropolitan area and redevelopment made sense economically. That’s a success story.

The same is true of Fitzsimmons Army Medical Center also in Denver. That site has been redeveloped and is now home to the University of Colorado Health Sciences Center and soon to be home to Children’s Hospital. This redevelopment and transition also made sense for the state.

However, I am certain there are circumstances around the country where the options Colorado had with respect to redevelopment of BRAC sites may not exist. Further enhancing the ability of the Economic Development Administration to address these kinds of circumstances while also addressing the nation’s need for additional refining capacity makes absolute sense.

This bill addresses that issue directly by providing incentives for American communities to consider the construction of new refineries to expand our nationwide capacity while taking advantage of existing infrastructure and preserving and creating jobs. It is the very definition of a Win-Win.

The legislation does not mandate any action on states, but merely provides additional incentives should they determine that is an appropriate use of the resource.

The Gas PRICE Act provides flexibility that states can choose to exercise in environmental permitting by entering into a refinery permitting agreement.

It’s important to remember that this provision only applies to those states or tribes that choose to participate.

No state or tribe will be forced to participate and there is no usurpation of the concepts behind any of the federal environmental laws that states or tribes are delegated to enforce. In short, there is simply no credible argument that can be made in claiming this proposal would abuse state or tribal authorities as they currently exist.

In fact, in Colorado, the State, Federal and tribal authorities have developed an excellent working relationship that has led to groundbreaking cooperation. For example, in southwest Colorado the three governmental entities have developed an air permitting program that places the Southern Ute tribe in charge of permitting on fee land within the tribal boundaries, ending a dispute over the question of who has authority on fee lands within tribal boundaries.

What this bill does is provide Governors and tribal leaders the authority to combine the permitting requirements for all of the different medias into one permit that must be issued under a prescribed time frame.

This is hardly a new concept in Colorado. In 2003, the Colorado State Legislature passed legislation providing the governor with the authority to consolidate different environmental permits into a single permit. The idea behind this concept is twofold.

First, we believe that a single process ensures that there is one timeline for issuance of a permit. Timelines for different permits can be for a single project are often prolonged because, for example, an air division may have a different method for handling evaluation for permits applications than say a water division. The idea is that one permit merging different requirements will benefit the applicant by applying one process.

Second, multi-media permitting is good for the environment. Colorado is currently piloting a multi-media performance based permit because we believe that eventually we will have to move to this kind of permit to continue making environmental improvement. Mr. Chairman, your proposal captures that concept and will not only provide needed relief from administrative burdens, but will also provide a better way to enhance environmental quality.

The purpose of a multi-media permit is to identify where the net gains for the environment are and work expeditiously toward achieving those gains. For example, wet scrubbers are better for controlling sulfur dioxide and, therefore, when seeking SO2 reductions, you would immediately think to install a wet scrubber, which, as you probably know, requires a lot of water to operate. In Colorado we don’t view the tradeoff between additional marginal SO2 controls to be worth the use of water it takes to operate a wet scrubber. In other words, not putting on a wet scrubber would be better for Colorado’s environment because it would conserve water.

Importantly, this legislation would force environmental agencies to take into account the net impacts to the environment to permitting a refinery by consolidating the permitting process.

Another positive aspect of your proposal, Mr. Chairman, is the timeline associated with either construction of a new facility or expansion of an existing facility. My experience has been that hard timelines tend to focus attention on what is important and these statutory timelines would certainly focus the attention not only of state regulators but also of EPA regulators who are charged with reviewing permits on facilities.

A definite endpoint to a permitting process is good for an agency as well as for a permittee.

The end result of this process would be a permit that would be issued sooner and would provide better environmental results with less administrative burden historically associated with permitting processes.

In fact, my state believes that a multi-media approach to permitting is so beneficial we are working with the refinery in the Denver Metro Area on a similar approach. Obviously, the state’s foremost concern is for protecting our environment. However, we also believe that efficiencies can be gained for the refinery through this approach, and certainly for the state, as well. A single timeline and the ability to issue on consolidated permit will ensure that permitting will not be a hindrance should a state decide to attract new refineries.

In short, we are putting our money where our mouth is with respect to this legislation, and believe that it would provide a key benefit to both the environment and to permittees.

Finally, Colorado strongly supports the hold harmless provision on states for acting pursuant to the grant of an emergency waiver. In Colorado, waivers have been granted and both the State and EPA have collaborated so that they are issued in an appropriate and responsible manner.

EPA has issued several emergency waivers, and, if those waivers result in an air quality problem, states should not be penalized under the Clean Air Act. I think that’s just common sense.

In conclusion, I would like to thank the committee for seeking our views and participation, and I would like to thank Chairman Inhofe for his leadership on this issue.

While there are many promising technologies that may serve to replace fossil fuels in the future, it does appear as if the nation will be relying upon them to some degree into the future. Because that’s the case, we need to have sufficient capacity in our country to ensure that a disaster like Katrina doesn’t have the same detrimental impact on our economy that Katrina had.