Gulf Region Disasters Reveal Necessity for Strategic Oil Refining Capacity

Rep. Allen: Gulf Region Disasters Reveal Necessity for Strategic Oil Refining Capacity

September 28, 2005

Committee instead misuses tragedy to justify more giveaways to oil refiners, waive regulations that protect public health

Washington, D.C. - U.S. Representative Tom Allen called today for a federal initiative to develop strategic oil refining capacity as the best way to address the critical threat to national security posed by gasoline and other fuel shortages that can result from natural disasters or terrorist attacks on the nation's oil refineries. Representative Allen made his comments during a House Energy and Commerce Committee mark-up session on H.R. 3893, the Gasoline for America's Security Act, legislation to give additional subsidies and regulatory waivers to oil refiners. The Committee's Republican majority cited the impact from Hurricanes Katrina and Rita on Gulf region refinery operations as the reason to rush this bill forward without a public hearing. Representative Allen expressed his support for an alternative proposed by Representatives Bart Stupak (D-MI) and Rick Boucher (D-VA).

"The recent Gulf disasters graphically demonstrated the need for a strategic design our nation can activate on short notice to ensure we can refine adequate supplies of gasoline and other fuels when commercial refinery operations are disrupted," Representative Allen said. "In the wake of Hurricanes Katrina and Rita, the bill before the Committee identifies the right problem but offers the wrong solution. Instead of open-ended government subsidies to oil companies, the substitute establishes a Strategic Refinery Reserve to complement the Strategic Petroleum Reserve. Instead of yet another study on price gouging, this substitute provides the FTC real anti-gouging authority during a national emergency. And it does all this without rolling back the Clean Air Act."

The Stupak-Boucher alternative directs the Secretary of Energy to establish a Strategic Refinery Reserve with the capacity to maintain a petroleum refining capacity equal to 5 percent of total daily U.S. demand for gasoline, home heating oil and other refined petroleum products. The Reserve will include a combination of new refineries designed and constructed specifically for it and through the acquisition and reopening of closed refineries. The Secretary will operate the refineries to provide petroleum products to federal, state and local government agencies that choose to purchase from the reserve. When there is a severe interruption to supply due to a natural or other disaster or when the President determines that there is a regional petroleum product shortage of significant scope or duration, the refineries will make products available to the general public as well. The bill requires the Secretary to certify that refineries in the reserve are located to assure regional access, access to areas especially susceptible to natural disasters or terror attacks and convenient to the SPR. Refinery design must accommodate a rapid increase in production to meet emergency needs.

"Congress has a clear choice here: give commercial refiners more government handouts and more regulatory waivers in the hope they will increase capacity, or take the steps needed to protect our national security from disruptions we know will occur," Representative Allen said. "The situation we find ourselves in today is a direct consequence of the failure of the current policy which the Republican bill perpetuates. Our nation's security demands that the federal government assume this crucially important responsibility."

Representative Allen noted that from 1977 through 2002, the number of refineries in the US decreased from 282 to 153 while gasoline demand rose 27 percent.

"Why hasn't the private sector built more refineries?" Representative Allen asked. "The answer is profit margin. Fewer refineries mean higher profits. Their strategy has worked. Their profits soared even before the recent natural disasters. Hurricanes Katrina and Rita merely converted already record profits into obscenely indefensible profiteering."

Representative Allen also made the case for a federal strategic oil refining capacity initiative this morning on the CNBC program "Wake Up Call."

"I am disappointed that the Committee Majority appears to be using the occasion of the national tragedies in the Gulf region to enact more of the same discredited policies contained in the energy bill passed over the summer," Representative Allen said. "It appears to be part of a concerted effort to advance extreme ideology at the expense of the victims of the horrendous natural disasters that so recently struck our nation. While it took the federal government an excruciatingly long time to respond to Hurricane Katrina, the President and Congress have wasted no time suspending worker protections, waiving environmental laws and offering private school vouchers and faith-based initiatives in the regions devastated by these storms."

http://tomallen.house.gov/showart.asp?contentID=1726&IssueID=1&ID=