Senate Committee Rejects Republican Refinery Bill

By J.R. Pegg

WASHINGTON, DC, October 26, 2005 (ENS) – A Senate panel today rejected a Republican plan to increase U.S. oil refining capacity, citing concerns the bill would relax environmental regulations and grant new subsidies to oil companies already enjoying record profits.

Rhode Island Republican Senator Lincoln Chafee joined the committee’s seven Democrats and lone Independent to block the legislation.

Rhode Island Senator Lincoln Chafee is serving his first elected term after his appointment by the Governor of Rhode Island to fill the unexpired term of his father, the late Senator John H. Chafee, in November 1999. (Photo courtesy Office of the Senator)

"We have failed to address our consumption," Chafee said. "There is still time to do something in a comprehensive way."

Democrats had a far harsher assessment of the proposal.

The legislation is "socialism to help big oil," said Senator Barbara Boxer, a California Democrat.

"It is help to the cronies – that is what this is about," said Boxer, who raised concerns the legislation, if passed, would also have to be merged with a controversial refinery bill approved earlier this month by the House.

The House bill passed by a vote of 212-210, with no Democrats supporting the legislation - Republican leaders held the vote open 40 minutes longer than normal to assure its passage.

Senate Environment and Public Works Committee Chairman James Inhofe sought to distance his proposal from the contentious House bill and said "the fear of a conference is no excuse not to legislate."

Senator James Inhofe of Oklahoma entered the Senate in 1994 when he won a Special Election held to fill the unexpired term of Senator David Boren who resigned to become president of the University of Oklahoma. He was re-elected in 1996 and again in 2002. (Photo courtesy Office of the Senator)

The Inhofe legislation, crafted in the wake of hurricane damage to Gulf Coast oil refineries and record gasoline prices, calls for federal funding to encourage construction of new refineries on closed military bases.

The bill would streamline the environmental permitting process to expedite the construction of new refineries and the expansion of existing facilities.

The legislation also calls for limits on the production of "boutique" fuels some states use to meet clean air standards, the easing of federal air pollution rules in the event of fuel emergencies, and restrictions on the ability of states to challenge refinery construction permits.

Missouri Republican Senator Kit Bond said the bill is necessary because oil companies face "an impossible jungle" of regulations that makes it "economically unfeasible" to build new refineries.

"They need relief from the permitting process," Bond said.

Republican Senator Kit Bond of Missouri was first elected to the Senate in 1986 and was re-elected in 1992, 1998, and again in 2004. (Photo courtesy Office of the Senator)

Refiners now must supply 18 different formulations of gasoline, but can produce only one formulation at a time. Some of the specialty fuels are summer formulations that produce lower emissions to meet Clean Air Act standards in cities with high levels of air pollution.

Laws that took effect in 2004 forced refiners to switch some formulations. California, New York and Connecticut no longer sell fuel with the water polluting oxygenate MTBE, instead changing to fuels with ethanol, a fuel derived from grain. Refiners must make new reformulated gasoline to blend with the ethanol.

"This country is in an energy emergency," said Senator Jim DeMint, a South Carolina Republican. "This is a modest step."

Critics said the bill fails to address the reality of the problem.

"I am not convinced that permitting requirements under federal law are providing a serious impediment to increasing refinery capacity," said Senator James Jeffords, a Vermont Independent and ranking minority member of the committee.

Oil companies have shut refineries – and expanded capacity at some facilities – in order to take advantage of a very tight market for gasoline, Jeffords said.

"This bill would have weakened environmental regulations and dramatically changed the federal-state structure of judicial review established in our environmental laws," Jeffords added, "while doing virtually nothing to lower gas prices."

A petroleum refinery at Corpus Christie, Texas (Photo courtesy U.S. Coast Guard)

The Inhofe bill is akin to taking money from the taxpayers "and giving it to oil companies who are so fat with profits they don’t know where to spend it," said Senator Frank Lautenberg, a New Jersey Democrat.

The world’s five largest oil companies are expected to reap in a combined third-quarter profit of some $28 billion – today BP announced profits of $6.4 billion.

The committee also rejected a rival plan, offered by Jeffords, to create a strategic refinery reserve – similar to the existing Strategic Petroleum Reserve – and shift refinery permitting oversight to the U.S. Environmental Protection Agency.

Chafee joined the committee’s nine other Republicans to defeat the Jeffords proposal.

The United States experienced a steep decline in refining capacity between 1981 and the mid-1990s. Between 1981 and 1989, the number of U.S. refineries fell from 324 to 204, and refinery closures continued since 1989, bringing the total number of operable U.S. refineries to 149 in 2003, according to the Energy Information Agency (EIA), an agency of the U.S. Department of Energy.

While some refineries have closed, and no new refineries have been built in nearly 30 years, many existing refineries have expanded their capacities, the EIA reports.

As a result of "capacity creep," whereby existing refineries create additional refining capacity from the same physical structure, capacity per operating refinery increased by 28 percent over the 1990 to 1998 period, the EIA says.

Overall, since the mid-1990s, the EIA calculates, U.S. refinery capacity has increased from 15 million barrels per day in 1994 to 16.9 million barrels per day in September 2004.