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Senate Sarts Work on Refinery Capacity Bill

Less than 2 weeks after the US House of Representatives passed a bill on the same subject, the Senate took up legislation aimed at increasing domestic refining capacity. The Environment and Public Works Committee held a hearing Oct. 18 on S. 1772, the Gas Petroleum Refiner Improvement and Community Empowerment (or Gas PRICE) Act.

Chairman James M. Inhofe (R-Okla.) insisted that the bill was not simply a reaction to Hurricanes Katrina and Rita. "Rather, S. 1772 builds on the committee's consideration of issues facing the refining sector since its hearing in May 2004," he said in his opening statement.

"The fact that the hurricanes shut down one third of US refining capacity did, however, highlight what many objective, nonpartisan experts have concluded some time ago: The US lacks sufficient refining capacity to make the clean transportation fuels the public demands, and tight capacity translates to significantly higher prices at the pump," Inhofe continued.

But the committee's chief minority member, James M. Jeffords (I-Vt.), said the bill takes the wrong approach. "Instead of punishing the refineries for price gouging—at a time our nation can least afford it—I believe this bill rewards them for bad behavior with the promise of new subsidies and lax regulation," he maintained in his opening statement.

Jeffords said he also had "grave concerns" about S. 1772's potential environmental impacts. "I have seen no evidence that environmental permitting is the reason for a lack of refinery capacity. Nor am I convinced that relaxing our environmental laws will do anything to lower gas prices, either in the short term or the long term," he said.

The committee probably will start to mark up the bill in a week, a committee spokesman said.

Similarities, differences
Inhofe said the bill directs the Commerce Secretary and Economic Development Administration to provide additional funds to communities—"not to industry, as some claim" —considering building refineries on closed military bases. "Refineries are not just a good source of local high-paying jobs but are in the nation's interest," he said.

Because states play a significant part in issuing refining permits but may be limited financially and technically, the bill also would allow governors to opt in to a program that would require the Environmental Protection Agency to coordinate and concurrently review permit applications with the relevant state agencies, according to Inhofe.

Section 201 of the bill also tries to streamline refinery permitting by giving the EPA administrator authority to accept "a consolidated application for all permits that the refiner is required to obtain to construct and operate a refinery." It would give government regulators 270 days to approve or reject a consolidated application to build a refinery and 90 days to approve or reject a consolidated application to expand an existing plant.

HR 3893, which the House passed on Oct. 7, designated the Department of Energy as the federal refining permit application coordinator, but only if a state's governor requested it or the US president designated a site as suitable for a new refinery (OGJ, Oct. 17, 2005, p. 22).

The Senate bill also addresses the boutique motor fuel issue. "Bipartisan senators have sought to reduce the number of boutique fuels to promote greater supply stability. Yet boutique fuels address environmental needs of each region," said Inhofe. "Therefore, I have proposed a cautious approach that will reduce fuel blends pursuant to the environmental and consumer preferences in each state."

The bill would allow the EPA administrator to remove a fuel from the list if it's no longer part of a state's implementation plan or if it's identical to a fuel that's part of a federal clean air improvement plan. The bill approved by the House would require the EPA administrator to identify six gasoline and diesel formulations for a federal fuels list, reducing the number from its current level of 17.