ENERGY POLICY BILLS TAKING SHAPE IN HOUSE

A House subcommittee has approved a bill that would require 1% of all U.S. oil production and imports to be placed in the Strategic Petroleum Reserve. The subcommittee, working on a series of energy policy bills, also approved some noncontroversial measures designed to speed federal permitting for natural gas pipelines. Rep. Phil Sharp (D-Ind.), chairman of the House energy and power subcommittee, originally filed a bill to require 3% of all imported crude and products to be placed in the SPR.

July 29, 1991

5 min read

A House subcommittee has approved a bill that would require 1% of all U.S. oil production and imports to be placed in the Strategic Petroleum Reserve.

The subcommittee, working on a series of energy policy bills, also approved some noncontroversial measures designed to speed federal permitting for natural gas pipelines.

Rep. Phil Sharp (D-Ind.), chairman of the House energy and power subcommittee, originally filed a bill to require 3% of all imported crude and products to be placed in the SPR.

The purchasers or importers of the petroleum would continue to own it and would receive the proceeds from a sale if the oil were used in an emergency.

Before the markup, Sharp changed the proposal to apply to 1% of all U.S. oil supplies, imported and domestic.

The subcommittee approved an amendment that would allow purchasers of U.S. crude or importers of crude to pay the Department of Energy a sum equal to the value of 1% of their crude supplies rather than transferring wet barrels.

Deputy Energy Sec. Henson Moore said his department will recommend that President Bush veto the bill. He cited several reasons, including hampering of U.S. production.

LAST RESORT

Sharp said the setaside provision would cost less than 0.5/gal, or an estimated $1 billion/year.

Goal of the setaside is to increase the SPR from the current 750 million bbl goal to 1 billion bbl or a 90 day supply of imports, whichever is greater, at a rate of 150,000 b/d/year. The SPR currently contains 568.5 million bbl.

Sharp said the "last resort" provision would not begin until mid-1993, giving the administration time to find ways to finance government SPR purchases or to lease oil from producing countries for storage in the reserve.

The bill would require the government to create a 50 million bbl petroleum products reserve in the U.S. Northeast.

And it gives the president authority to draw down the SPR not just in case of an oil shortfall, but also if it "would assist in relieving severe economic problems directly related to a significant increase in the price of petroleum products."

Sharp said at current fill rates, it will take 23 years to fill the SPR. Meanwhile, increasing imports have eroded the SPR cushion from a 118 day supply of oil in 1985 to 83 days at present.

The subcommittee rejected several amendments by Republicans that would have weakened the bill.

Rep. Joe Barton (R-Tex.) proposed exempting stripper and heavy oil production. Barton categorized Sharp's bill with a statement Texas Gov. Ann Richards had used to describe a bill in her state: "Putting lipstick on a hog don't make it pretty."

But Sharp said consumers would end up paying for the 1% setaside and "if anyone has to eat it, it's going to be refiners, not small producers."

Rep. Clyde Holloway (R-La.) proposed the setaside be limited to imported oil.

Sharp said the administration has been vehement in protests against that, industry lobbyists have said "differentiating between oils would create a host of inequities in the marketplace," and New Englanders fear they would pay the bulk of a fee on imported crude alone.

Separately, the subcommittee approved a bill that would give states authority to prevent gasoline octane mislabeling. It rejected an amendment for a study on dying different gasoline grades different colors.

GAS PIPELINES

The subcommittee also approved Sharp's bill to streamline natural gas pipeline construction.

It reduces restrictions on gas imports from Canada and Mexico and LNG imports, dropping the requirement for import licenses and making the import approval process automatic. Federal and state regulators would be required to treat imports and domestic gas the same.

The bill allows pipelines to be built or expanded on a "fast track" with minimal Federal Energy Regulatory Commission proceedings if the builder and shippers agree to bear all the financial risks.

It reverses a court ruling and allows fast track permitting for Natural Gas Policy Act Section 311 pipelines-connections between parts of the existing national pipeline grid.

The bill would speed FERC's environmental reviews, allowing outside consultants to prepare environmental assessments and impact statements for FERC.

It gives small producers an antitrust exemption so they can pool their volumes of gas in a marketing cooperative.

It requires more rapid FERC consideration of requests for rehearing, unopposed projects, replacement projects, and projects the FERC chairman declares as being in the national interest.

The bill allows FERC to order hookups between gathering lines and interstate lines in gas production areas, if the party seeking the hookup pays for it. And FERC could order similar "demand" hookups between interstate lines and local distributors.

And it permits FERC commissioners to hold private meetings to discuss general natural gas policies.

The subcommittee approved an amendment by Rep. Norman Lent (R-N.Y.) that would retain the existing regulatory structure for imported gas. Independent producers persuaded Senate energy committee to amend its bill, placing imported gas under more FERC scrutiny.