Maureen Lorenzetti
OGJ Online
WASHINGTON, DC, June 14 -- Retooling clean fuel 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 Subcommittee on Energy Policy, Natural Resources, and Regulatory Affairs, Environmental Protection Agency officials Thursday 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 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.
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, like 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 lower 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 and Refiners Association warned it "will put additional domestic refining capacity at risk."
Both EPA and the 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 (OGJ Online, June 12, 2001).
Republicans have divided portions of the blueprint that address key points such as taxes, environmental laws, royalty matters, and public land access to individual committees to consider. Most of the controversial sections of the White House plan would require congressional action, such as opening a portion of the coastal plain of the Arctic National Wildlife Refuge to development.
Congressional sources said the House GOP may try to bundle the proposals together in an omnibus bill or have them voted on separately this summer.
In the Senate, the Democratic majority has signaled it does not want one giant omnibus bill. Rather it wants narrowly defined legislation that will help with short-term problems such as seeking wholesale electricity price caps in the West.
Looking at a way to update the RFG program is not out of the question, however, 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 fuel 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.
Industry and congressional sources say that earlier drafts that sought to strip state authority from many offshore oil and gas decisions are likely off the table, as are mandatory royalty in-kind proposals. But Republican leaders still want to offer ANWR exploration for consideration, which could stall legislation indefinitely.
Opponents of ANWR drilling fear Republicans will seek to hold other energy legislation, such as wholesale electric price caps or energy efficiency tax credits, hostage unless the drilling provision is considered. But industry lobbyists say that scenario is unlikely given the political pressure on both Democrats and Republicans to move forward quickly with energy legislation.
Contact Maureen Lorenzetti at [email protected]