Retooling US clean fuels legislation is under consideration by the White House and Congress as energy issues continue to dominate the domestic policy agenda.
In testimony before the House Sub- committee on Energy Policy, Natural Resources, and Regulatory Affairs, En- vironmental Protection Agency officials last week said they-along with the departments of Energy, Agriculture, and other agencies-are meeting with refiners and states to look at ways to streamline reformulated gasoline (RFG) specifications.
"We see the study as an opportunity to provide maximum flexibility to the fuel production and distribution system," said EPA Acting Assistant Administrator Rob Brenner. He said the agency will make recommendations "shortly" on whether the RFG program should be changed. Some lawmakers are urging EPA to change the program from a state to a regional emphasis so refiners can move product more efficiently.
California waiver denial
The agency also defended the White House's controversial decision to deny California a waiver from the 2 wt % oxygenate standard in RFG. EPA said it is concerned, as is California, about the risk of the oxygenate methyl tertiary butyl ether (MTBE) to underground drinking water supplies. However, the agency's hands are tied unless Congress changes the Clean Air Act.
"As it currently stands, the Clean Air provisions limit the agency's ability to address these concerns," Brenner said. "Clean air and clean water are important. We do not want to pursue one at the expense of the other."
Under the Clean Air Act Amendments of 1990, refiners must use a specific fuel recipe for cities or states in noncompliance with clean air standards. That recipe includes a mandated oxygen level in which there are only two commercially viable additives: fuel ethanol and MTBE. Congress required RFG in 10 metropolitan areas that have the most serious air pollution levels. Although not required to participate, some areas in the Northeast, plus Kentucky, Texas, and Missouri, elected to join in the program to reduce smog. RFG constitutes about 35% of the US gasoline supply.
California lawmakers, including the subcommittee chairman Doug Ose (R-Calif.), say EPA's decision will increase gasoline prices even further, because the only way to meet the RFG oxygenate rule is through fuel ethanol, the supplies of which may be insufficient when the MTBE ban goes into place by 2003. Ethanol producers say they can meet the state's demand.
Refiners cautioned the committee that any changes to the program should not increase the cost of making fuel. The National Petrochemical & Refiners Association warned it "will put additional domestic refining capacity at risk."
Both EPA and the US Energy Information Administration, however, stressed that clean fuels are not the primary reason US motorists have seen record- high gasoline prices.
EIA said tight crude markets, high refinery capacity runs, along with so-called "boutique" RFG types, all contribute to higher prices.
Push planned
The hearing came at a time when House Republican leaders are putting the finishing touches on an energy issue offensive for the summer, designed to showcase the White House's energy blueprint in one giant omnibus bill (see related story, p. 32, and OGJ Online, June 12, 2001).
While the Senate instead wants narrowly defined legislation to deal with short-term problems, looking at a way to update the RFG program is not out of the question-especially given that Senate Majority Leader Tom Daschle (D-SD) is a major ethanol proponent. Congressional sources say discussions have begun about considering an oxygenate trading program that would give refiners flexibility on clean-fuels rules, but talks are in the early stages.
Back in the House, the Committee on Energy and Commerce may reconsider RFG. The Committee on Resources may have hearings on the administration's energy policy proposals the second week in July, with a markup soon after.
