ENVIRONMENTAL CONCERN OUTWEIGHS ACTION ON ENERGY IN CONGRESS

Jan. 29, 1990
Patrick Crow Washington Editor U.S. environmental issues will continue to outweigh energy concerns in this session of Congress. And the environmental issue with the top priority is reauthorization of the Clean Air Act. Although the legislation is hotly debated and although previous attempts to amend it have failed, passage is likely this year because most key parties involved-congressmen, the administration, and environmentalists, for example-want a bill. Congress is expected to agree on
Patrick Crow
Washington Editor

U.S. environmental issues will continue to outweigh energy concerns in this session of Congress.

And the environmental issue with the top priority is reauthorization of the Clean Air Act.

Although the legislation is hotly debated and although previous attempts to amend it have failed, passage is likely this year because most key parties involved-congressmen, the administration, and environmentalists, for example-want a bill.

Congress is expected to agree on another major environmental bill, oil spill liability legislation, within a few months.

Both houses have passed bills. Several other environmental bills are pending, as are a few other measures dealing directly with oil and gas operations.

When Congress resumed work last week, the first order of business on the Senate floor was the opening of debate of amendments to the 1970 Clean Air Act (CAA) legislation.

That debate promises to be rancorous. President Bush, the oil industry, and manufacturers staunchly oppose the Senate bill.

Bush claimed the bill would cost industry $40 billion/year by 2000, while the administration's CAA bill would cost only $19 billion to achieve the same reduction in airborne pollutants.

In a letter to Senate leaders, Bush hinted he will veto a bill that does not meet 11 minimum tests of balance and reasonableness."

He said those tests include protecting the environment at the same cost of his bill, avoiding new taxes, and permitting polluters to lower their emissions on a "least cost per ton" approach.

Sen. Majority Leader George Mitchell (D-Me.), a strong CAA advocate, replied that a veto would run against the strong public desire for tougher air quality laws, and there are overriding health benefits from the bill.

Mitchell said, "There are costs, but they will be less than the costs of health care. You ask if industry will be able to survive this bill. The question is: Will the American people survive the failure to enact this legislation?"

Congressional aides said the administration miscalculated the cost of the Senate bill's new pollution controls, especially for auto emissions.

SENATE BILL

The Senate environment committee's bill is notable to the oil industry in that it omitted the administration's proposal for alternative fuel vehicles in ozone nonattainment cities. The committee left that issue to be settled in an amendment on the Senate floor.

The committee noted more than 100 areas in the U.S. do not meet health standards for ozone (smog), more than 40 do not meet the carbon monoxide standard, and 58 exceed the health standard for particulate matter.

Depending on the severity and type of pollution in nonattainment areas, the bill requires them to meet the health standards within 5-20 years, making specific progress each year. For example, ozone areas must reduce volatile organic compound (VOC) emissions 4%/year.

Polluters would be required to pay $75/ton for emissions. Local air pollution control agencies would collect and use those fees.

The bill sets tougher tailpipe emission standards for new cars and trucks in the 1990s and makes them twice as stringent in 2003, requires stricter fuel economy standards, and requires service stations in smog areas to install Stage 11 VOC emission recovery equipment.

It requires the Environmental Protection Agency to control emissions of 200 toxic chemicals from manufacturing plants, including tight rules to guard against accidental release of about 50 extremely hazardous substances.

The bill requires utilities to reduce sulfur dioxide emissions to 10 million tons/year by 2000. Emissions will be capped at that level, forcing new plants to secure offsetting emissions reductions before adding new capacity.

COSTS QUESTIONED

Forty senators have asked the Congressional Budget Office, Congressional Research Service, and Office of Technology Assessment to estimate the costs of the Senate bill. Advocates of the legislation said that was an attempt to stall the measure.

The Business Roundtable said the Senate bill probably would cost industry $54 billion/year: $5 billion for acid rain compliance costs, $24 billion for ozone reduction, and $25 billion to cut air toxics.

Business Roundtable said the total could be as high as $104 billion and force many plants to close or restrict production. It said if the stringent air toxic risk requirements become law, they could cost $55 billion/year alone (see table, this page).

The Clean Air Working Group, an industry coalition, said the $54 billion "best estimate" is nearly double the $32 billion currently being spent to clean the air.

CAWG Administrator William Fay said, "There are less costly, less wasteful ways to achieve our clean air goals.

"One reason for the high cost of the Senate bill is that it relies on technologies that do not yet exist, products that have yet to be invented, and onerous requirements that do little to improve air quality.

Fay called the Senate bill an extremist measure, all the more unworkable because it tries to solve a host of imaginary problems while diverting attention and resources from real world environmental concerns.

He said, "A healthy environment and a healthy economy are inextricably linked. We cannot have one without the other. If Congress passes the current Senate bill, it will surely damage our economy and reduce our ability to solve other more pressing environmental and social problems.

"America does not have a clean air crisis. Outside of Los Angeles, the air in the U.S. is healthy more than 99% of the time."

The Sierra Club disagreed, disclosing a study that said U.S. citizens are subjected to unhealthy levels of air pollution 65% more frequently than the Environmental Protection Agency has reported.

It said industry has traditionally inflated the costs of cleaning up the air, and numerous polls have found most Americans are willing to pay for clean, healthy air.

The American Lung Association said air pollution costs Americans $40 billion/year for health care.

HOUSE PROGRESS

The House energy and commerce committee is moving much slower on CAA legislation.

The House health and environment subcommittee passed a modified version of the administration's CAA package after subcommittee Chairman Henry Waxman (D-Calif.) and full committee Chairman John Dingell (D-Mich.) agreed on several key provisions,

But the bill then stalled in the energy and power subcommittee when Rep. Phil Sharp (D-Ind.) could not get an agreement on a cost sharing provision in the acid rain portion of the bill. Sharp wants the federal government to help midwest states that would be hard hit by acid rain controls.

Earlier, the oil industry was victorious when the health and environment subcommittee scaled back the administration's alternate-fuel vehicle program.

The administration had proposed to require automakers to develop and sell 1 million "clean fueled" vehicles a year beginning in 1997 for use in nonattainment areas.

Although methanol powered vehicles were not specifically required, the cars would have had to achieve the same emissions performance standards as cars burning M85 (85% methanol and 15% gasoline) and the same performance as pure methanol in 2000.

But the oil industry accused the administration of bias toward methanol, which would disadvantage development of cleaner burning gasolines.

The auto and oil industries cited safety, environmental, and economic risks of using methanol fuels.

The subcommittee decided auto manufacturers would not have to make dual-fueled vehicles, only to certify they have the capacity to produce them, and it reduced the emissions standard. The full committee could reverse that action.

The American Petroleum Institute said the change would achieve the same level of air quality improvement as the administration's clean air proposal but would allow fuel and vehicle manufacturers to develop the best options in the most cost effective manner.

OIL SPILL BILLS

The Exxon Valdez oil spill in Alaska's Prince William Sound last year prompted congressmen to file scores of bills regarding tanker safety and spill liability, prevention, and cleanup.

With unusually strong support, liability bills have passed both houses of Congress and face conference committee action soon. Committee leaders have expressed the goal of passing a final bill by the anniversary of the spill, Mar. 24.

Both House and Senate bills would create a $1 billion federal oil spill cleanup fund, financed through a 5/bbl tax on oil delivered to refineries.

The bills also contain a variety of measures to lessen the likelihood of future spills and improve cleanup methods.

For years, the House and Senate had been deadlocked over whether to allow a federal oil spill liability system to override state legislation. But as a result of Exxon Valdez, the House yielded and permitted state liability laws, which generally provide unlimited liability, to coexist with the federal system.

The House bill limits the liability of tanker owners to $1,200/gross ton of the vessel and the Senate bill to $1,000/ton. Both deny liability limits to spillers guilty of gross negligence or willful misconduct. The Senate bill limits claims on the fund to $1 billion/accident while the House has no limit.

Both require the government to study whether tankers should be required to have double hulls. The measures also contain numerous other provisions to enhance tanker safety.

NEW TAXES?

Bush is expected to tell Congress in his State of the Union address next week that new taxes are not needed. But in his later budget proposals he may propose new or additional "user fees" instead.

Bush has announced that again this year he will ask Congress to reduce the tax rate on capital gains from the current maximum of 33% to 15-20%.

The administration says reducing the rates on capital gains, which currently are taxed as ordinary income, would stimulate investment and create jobs.

Last year Bush proposed a bill to improve the tax climate for oil exploration and production, including a 10% tax credit to encourage exploration.

The tax writing committees of Congress, under pressure to increase taxes and not reduce them, did not act on the bill. Since then, higher crude oil prices have further undermined the prospects for passage of a bill.

Congress may consider increasing the federal gasoline tax, although Bush opposes an increase as do many congressmen and special interest groups.

But Rep. Dan Rostenkowski (D-Ill.), chairman of the House ways and means committee, raised the issue again this month. He suggested the 9.1/gal tax be increased 15/gal and the proceeds earmarked for various programs, including rebuilding highways and bridges.

OTHER BILLS

House and Senate committees will consider bills this spring to increase federal controls on coastal pollution, which could affect the offshore oil industry.

And the House energy committee plans to mark up a bill reauthorizing the 1976 Resource Conservation and Recovery Act. The oil industry is concerned that an effort might be made to classify drilling fluids and produced brines as hazardous wastes.

Action is uncertain on pipeline bills pending in Congress.

The Department of Energy has proposed decontrol of all crude and products pipelines except the Trans-Alaska Pipeline System.

Under the plan, DOE would study regional pipeline markets. If it determined they are competitive, all lines in that region would be decontrolled. If not, DOE would set tariffs equivalent to those of the unregulated pipelines.

The House interior committee has approved a bill to give coal slurry pipelines the right of eminent domain-if the lines have obtained local water rights and if the secretary of Interior determines they are in the national interest.

Once again, congressional committees will consider continuing funding bans that block Outer Continental Shelf lease sales.

Last year, in the Interior Department appropriations bill, Congress more than doubled the offshore acreage for which Interior cannot spend money for lease sale planning.

The House appropriations committee also is likely to revive a "buy America" provision that would require future offshore drilling rigs and platforms to contain at least 50% American materials and labor.

And committees will examine bills to reauthorize the Strategic Petroleum Reserve. They may consider expanding the ultimate size of the reserve from 750 million to 1 billion bbl, whether to create product reserves in the Northeast and Hawaii, and whether to lease crude from exporting countries.

OVERSIGHT HEARINGS

Because this is an election year, Congress will be in session fewer days and can be expected to focus more on oversight issues.

It typically will be very productive in the spring, but when summer arrives legislation will slow perceptibly.

Long breaks also are scheduled for July and August, which will allow more time for campaigning. Congress is due to adjourn early in October, about a month before the Nov. 6 elections.

Committees will conduct a number of oil-related oversight hearings this spring.

They may include reviews of last December's fuel oil price increases, the progress of Exxon's cleanup in Prince William Sound, Bush's pending decision on three controversial offshore lease sales, DOE's National Energy Strategy, and the Interior Department's initial draft of the next 5 year offshore lease sale schedule.

A BOOST FOR EPA

Bush has urged Congress to elevate the 20 year old EPA to cabinet status.

Congressional staff said Congress will act soon on such bills already filed and should pass them without difficulty. Most recent sessions of Congress have seen bills to make EPA a cabinet level agency.

Despite a 1988 election campaign claim that he wanted to be the "environmental" president, Bush opposed a bill last year. He explained he wanted to keep the cabinet, now with 14 members, at a manageable size.

EPA played a large role in the administration's policies in 1989, investigating the Exxon Valdez spill, negotiating global ozone depletion treaties, and preparing the administration's CAA proposal.

Last week Bush said, "I've decided the environmental challenges that face America and the world are so important they must be addressed at the highest level of our government. Many countries have environmental ministers with cabinet status, and I'm convinced that cabinet status will help influence the world's environmental policies."

Some of the pending bills also would establish an office of environmental statistics within EPA and establish a commission to study ways to reorganize the agency, which has 15,000 employees and a $5 billion/year budget, to make it more effective.

Sponsors of bills said they will press to gain passage by Apr. 22, the 20th anniversary of Earth Day.

Copyright 1990 Oil & Gas Journal. All Rights Reserved.