Rep. Joe Barton (R-Tex.) faces several sticky issues in his quest, announced Sept. 26, for a legislative boost to US refining capacity. For starters, he and his colleagues in Congress have a credibility problem.
“Hurricane Katrina has taught us some harsh lessons,” Barton said while introducing a discussion draft of the Gasoline for America’s Security Act of 2005. “One of those lessons resonated loudly in our committee’s hearing on Katrina: If we expect gasoline to remain affordable for America’s working people, we absolutely must build additional refinery capacity.”
Concern for gasoline prices was nowhere in evidence when the House Energy and Commerce Committee, which Barton chairs, navigated into law on Aug. 8 an energy bill certain to raise gasoline costs. In submission to agricultural interests, lawmakers passed with scarcely a quibble a huge mandate for ethanol in gasoline. And in submission to the tort bar, they rejected product-defect litigation protection for makers and sellers of the gasoline oxygenate methyl tertiary butyl ether.
Politicizing chemistry
Those mistakes assaulted the interests of gasoline consumers. They reflect a legacy fundamental to what Barton correctly sees as a deficit of US refining capacity relative to demand for oil products. That legacy is politicization, at all levels of government, of fuel chemistry. If Congress doesn’t break the pattern, if it just tinkers with superficialities and splits differences with extremists as usual, any gasoline initiative will lack substance and probably worsen the refining problem. Lawmakers must demonstrate seriousness of purpose by, first, correcting the errors they made this year with ethanol and MTBE and, second, rethinking old assumptions about oil, the environment, and refining.
Potentially helpful quick fixes are at hand, some contained in the discussion draft Barton circulated last week: expedited permitting for refineries and pipelines, for example, and limits on local variations in fuel specification. Constructive initiatives conspicuously absent from the discussion draft include improvement beyond what the new energy bill offers in depreciation accounting for new refinery assets, rationalization of deadlines for the new 8-hr ozone standard, and staggering of the dates by which refiners must meet several expensive environmental regulations soon to take effect.
While specifics in and missing from Barton’s discussion draft are important, they’re secondary to the need to adjust faulty assumptions under which Congress and regulators have rendered the US inhospitable to investment in new refineries. Those assumptions enabled lawmakers to mandate a noncommercial additive in gasoline and leave the refining industry in legal jeopardy over MTBE-all in the name of energy policy. They have to change.
Broad principles
Congress needs to recognize that:
• The strictest possible regulation isn’t always best for the environment or consumers. Highway diesel consumers will learn this the hard way next year, when sulfur-content standards lower than they need to be start taking effect.
• Improving environmental regulations by conforming them to reality is not the same as reversing course on environmental progress. Extremists who insist otherwise are unreasonable, and their motives are suspicious.
• The best environmental regulations for fuels set performance standards and let refiners find ways to meet them. The worst regulations dictate fuel content.
• Too much of the politics of refining has roots in antioil prejudice. Some of the prejudice comes from native dislike of oil companies. Some of it grows out of fantasies about-or commercial interest in-the displacement of oil by alternative energy forms. Whatever the origin, the prejudice ill serves a country that needs-and will continue to need no matter how rapidly alternatives develop-great quantities of oil.
• Refineries tie up a lot of capital for a long time and buy feedstock and sell products in volatile, unpredictable markets. Capricious regulation discourages investment by adding to an already heavy burden of risk.
• The free market remains the only valid mechanism for balancing supply, demand, and price. Government can’t do the job and shouldn’t try, as some lawmakers threaten to do in response to recent jumps in the price of gasoline.
These are broad principles. That many US lawmakers and regulators don’t accept them is an assumption refiners must make in their business decisions. This is the biggest challenge Congress faces as it addresses a long-developing refining crisis it has just now discovered.✦
