HOUSE PASSES HALF A GESTURE ON US REFINING

Bob Tippee

Gestures don't build refineries. Half-gestures build even fewer of them.

The US House has passed half a gesture on US refining.

Its Gasoline for America's Security Act acknowledges that energy supply is important to US security and that refining deserves attention (OGJ Online, Oct. 10, 2005). That's the gesture. But it's only half the story.

The legislation also zig-zags between minor inducements for refinery construction and signs that little about chronic US hostility toward refining has changed.

It directs the Department of Energy to expedite refinery permitting—but only for officially sanctioned projects.

It mandates a reduction in the number of specialty fuels sold across the nation—but leaves refiners subject to product-defect lawsuits because they met clean-air fuel specifications with nondefective methyl tertiary butyl ether.

It promotes the use of old military bases as refinery sites—but doesn't approve reform of a New Source Review program thrown into punishing confusion by the Clinton administration.

It encourages pipeline construction—but mandates a federal investigation of "price-gouging" after Hurricane Rita, stipulating that evidence is any price increase unrelated to cost following the storm.

The House thus has expressed concern about a problem having to do with refining capacity but hasn't addressed the real problem: embedded resistance to refining.

In fact, it has aggravated the resistance by using a national problem to exploit discredited suspicion about gasoline pricing. And with the "price-gouging" bluster, it has put refiners on notice that selling gasoline after a hurricane may constitute criminal behavior.

On balance, the Gasoline for America's Security Act makes only a modest effort to encourage investment in new refining capacity but leaves large impediments to construction and upgrades in place.

It affirms that decisions about refining investments in the US must account for more than the risks associated with price volatility and a recent history of chronic unprofitability. They also must anticipate the caprices of an antagonistic political climate.

Perpetuating such a climate is no way to encourage refining construction in the US or anywhere else.

So anywhere other than the US is where most if not all future refinery construction will occur.

(Online Oct. 14, 2005; author's e-mail: bobt@ogjonline.com)

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