Statement by Senator Inhofe Introducing the
Gas Petroleum Refiner Improvement and Community Empowerment Act

May 24, 2007

Today I rise to introduce the Gas Petroleum Refiner Improvement and Community Empowerment Act or Gas PRICE Act.  While Chairman of the Committee on Environment and Public Works I sought to move a similar measure.  Unfortunately, my colleagues on the other side of the aisle managed to block the bill at that time. 

Today, motorists are facing record high gas prices and according to Labor statistics, those higher fuel prices are hurting the national economy as a whole.  Unfortunately, the pain at the pump, the grocery store, and the shopping mall were predicted long ago and are largely a function of politicking, rhetoric, and finger pointing – actions that continue today.

According to Deutsche Bank energy experts Paul Sankey and Rich Volina who testified May 15, 2007 before the Senate Energy Committee, “Anybody who blames record high US gasoline prices on “gouging” at the pump simply reveals their total ignorance of global supply and demand fundamentals.”  Yet, yesterday the House narrowly passed a bill that does just that – goes after so called “gougers” while doing nothing to affect supply.

I am hopeful that my colleagues in the Senate will join me and quickly pass the bill I am introducing today.  Our constituents elected us to solve problems and make their lives better, not to name call and demagogue. 

I have been talking about the lack of adequate refining supplies for some years.  In May 2004, while Chairman of the Committee on Environment and Public Works, I held a hearing on the environmental issues regarding oil refining.  The Committee received testimony about the lack of adequate refining capacity and the obstacles the industry faced in order to meet consumer demand. 

In a May 2005 speech, then-Federal Reserve Chairman Alan Greenspan stated, “The status of world refining capacity has become worrisome as well. Of special concern is the need to add adequate coking and desulphurization capacity to convert the average gravity and sulphur content of much of the world’s crude oil to the lighter and sweeter needs of product markets, which are increasingly dominated by transportation fuels that must meet ever-more stringent environmental requirements.” 

The fact of the matter is that, like it or not, the US needs to increase its refining capacity if we are to solve the economic struggles facing every family.

The bill I am introducing today redefines and broadens our understanding of a “refinery” to be a “domestic fuels facility.”  Oil has been and will continue to play a major role in the US economy, but the future of our domestic transportation fuels system must also include new sources such as ultra-clean syn-fuels derived from coal and cellulosic ethanol derived from home grown grasses and biomass.

Expanding existing domestic fuels facilities like refineries or constructing new ones face a maze of environmental permitting challenges.  The Gas PRICE Act provides a Governor with the option of requiring the federal EPA to provide the state with financial and technical resources to accomplish the job and establishes a certain permitting process for all parties.  And it does so without waiving environmental laws and working with local governments.

The public demands increasing supplies of transportation fuel, but they also expect that fuel to be good for their health and the environment.  To that end, the bill requires the EPA to establish a demonstration to assess the use of Fischer-Tropsch (FT) diesel and jet fuel as an emission control strategy.  Initial tests have found that FT diesel emits 25% less NOX, nearly 20% less PM10, and approximately 90% less SOX than low sulfur petroleum diesel.  Further, US Air Force tests at Tinker base in my home state found that blends of FT aircraft fuel reduced particulates 47-90%, and completely eliminated SOX emissions over contemporary fuels in use today.

Good concepts in Washington are bad ideas if no one wants them at home.  As a former Mayor of Tulsa, I am a strong believer in local and state control.  The federal government should provide incentives to not mandate on local communities.  Increasing clean domestic fuel supplies is in the nation’s security interest, but those facilities can also provide high paying jobs to people and towns in need.  My bill provides financial incentives to the two most economically distressed communities in the nation – towns affected by BRAC and Indian tribes – to consider building coal-to-liquids and commercial scale cellulosic ethanol facilities.

I am very proud that my home state of Oklahoma is a leader in the development of energy crops for cellulosic biofuels, and specifically coordinated programs through the Noble Foundation in Ardmore.  The key now is to promote investment in this exciting area, and nothing would speed the rapid expansion of the cellulosic biofuels industry more than investment by the nation’s traditional providers of liquid transportation fuels. 

Many integrated oil companies have formed or substantially expanded their biofuels divisions within the past year to prepare for the eventuality of cost-competitive cellulosic biofuels.  Cellulosic biorefineries will want to create an assured supply of feedstock and will enter into long-term contracts with surrounding biomass producers.

One of the incentives for oil companies to invest in exploration is that their stock prices are affected by their declared proved reserves. Creating a definition of renewable reserves would create a similar incentive for them to invest in cellulosic biofuels.

In 1975, Congress directed the SEC to promulgate a definition of proved reserves. At that time, the SEC based its definition upon broadly-accepted industry standards established by the Society of Petroleum Engineers (1978 FASB System). While no broadly-accepted industry standards yet exist for thinking about dedicated energy crops, industry, growers and agronomists could be brought together to agree on standards and practices. Agronomists could play a similar role in estimation of renewable reserves to that of petroleum engineers in proved reserves by providing independent projections of biomass yields.

The Energy Policy Act of 2005 directed the Department of Energy to accelerate the commercial development of oil shale and tar sands. As these unconventional fuel sources reach viability, the SEC will be pressured to develop methodology to incorporate them into its reserves hierarchy. Given the country’s interest in developing renewable alternatives to fossil fuels, it is logical that the SEC would develop criteria for the incorporation of biomass feedstock sources into its hierarchy at the same time.

This is Congress’ least expensive way to jumpstart the cellulosic biofuels industry. 

Much has changed in Washington since I was Chairman of the Environment Committee and held hearings on the need to improve our domestic transportation fuels system.  I hope that the new majority joins me in quickly passing the Gas PRICE Act – doing so would be a material and substantive action toward their stated goal of “energy independence” and would go far beyond more partisan symbolism. 

 I yield the floor.