WATCHING GOVERNMENT BURNING OVER ALTERNATIVE FUELS

Oil groups and others are protesting the U.S. Department of Energy's proposed rule requiring certain fuel providers to buy and use alternative fuels.

In the 1992 Energy Policy Act, Congress decreed "alternative fuel providers" must purchase and operate alternative fuel vehicles.

The mandate applies to companies producing or importing 50,000 b/d of petroleum if 2% of what they make is alternative fuels: methanol, denatured ethanol, certain alcohol/gasoline mixtures, natural gas, liquefied petroleum gas, hydrogen, coal derived fuels, and electricity.

OE adopted a broad approach in its proposed rule, published in the Feb. 28 Federal Register.

RULE FAULTED

Edward Kondis, a Mobil Corp. marketing and refining vice-president, testified about the rule during a DOE hearing. He spoke for the American Petroleum Institute and National Petroleum Refiners Association.

He said the proposal is an expensive unfunded mandate that lacks "credibly documented cost benefit analysis."

Kondis said Congress intended only to ensure that alternative fuel providers use their own products, but "DOE has ignored the legislative intent and instead has proposed the broadest possible definition of 'alternative fuel provider.'

"The potential reach of DOE's rule leads to unanticipated results, covering many people and businesses Congress never imagined and not covering those who truly benefit from increased sales of alternative fuels."

For example, he said, a refinery making small volumes of propane as a byproduct, Pot for use as a fuel, would be subject to the rule.

"DOE's proposed rule covers industries that manufacture products such as hydrogen and methanol without regard to whether these products are sold as transportation fuels."

He said commercially viable hydrogen powered cars are not available, but the regulation could require hydrogen producers to buy hydrogen powered cars.

Kondis said, "Once a company is covered by the rule, all (its) vehicles nationwide are part of the program, even small pockets of vehicles operated in remote locations, far from the fleet that was originally captured by the definition. This could lead to ridiculous and costly outcomes that we believe Congress never intended."

For instance, he said it would require an alternative fuel firm to purchase alternative fuel vehicles even if its own alternative fuel is not available in the area.

WHAT'S REQUIRED

The law required DOE to issue a rule Jan. 1, 1994, but make it effective Sept. 1, 1995, so companies would have 20 months to prepare.

Kondis said, "DOE has ignored the statutory deadline, letting it slip by almost 18 months. Nevertheless, DOE envisions that industry will meet the September 1995 effective date. This is totally unrealistic. It, in effect, penalizes industry for DOE's inaction."

He said the federal government failed to reach its goal of buying 11,250 alternative fuel vehicles in 1994 because those vehicles were unavailable. "It is clear that fuel providers and state fleets cannot be expected to meet the proposed DOE mandates when the federal government itself cannot meet its own obligations," he said.