July 16, 2001

VICTORY IN SUBCOMMITTEE; TO FULL COMMITTEE THIS WEEK!

Last Thursday, the House Energy and Air Quality Subcommittee approved the "Energy Advancement and Conservation Act of 2001," incorporating a key amendment that SIGMA supported and which we had called for member help last week. In an unusual situation, the bill doesn't yet have a bill number. The subcommittee vote was 29 to 1, with only Rep. Markey (D-MA) in opposition.

The "boutique fuels" section of the bill was approved as we reported last week, with two exceptions (which had already been changed before markup began). The bill calls for a study by EPA and DOE of the impact of boutique fuels on supply, prices, distribution, and the environment. It also calls on EPA to fix some problems in the blendstock accounting rules used for refiners that create an unnecessary bottleneck in the system, and to do something to ease the transition from winter to summer gasoline volatility standards. It does NOT include any reference to the ethanol "partial waiver" from RVP standards, which was made moot by EPA's regulatory action the week before. Also omitted from the bill: any reference to oxygenate averaging.

Among amendments that were adopted was one dealing with CAFE standards for light trucks and SUVs, which will have the effect of increasing those standards by about 1 mpg. There were no efforts to pass amendments dealing with ethanol, MTBE, and oxygenates - despite expectations that the Blunt bill (mandating ethanol) would be introduced as an amendment, and that Rep. Waxman (DCA) would try to put the California waiver from oxygenates into the bill.

In a key victory for SIGMA and our petroleum marketing allies - PMAA. NATSO, and NACS - the subcommittee approved an amendment that will block the phase-in provisions of the ultra-low-sulfur diesel rule. THANK YOU TO THE MANY SIGMA MEMBERS WHO WROTE AND CALLED THEIR CONGRESSMEN ON MONDAY AND TUESDAY! The vote was 11 to 4 (many subcommittee members were absent at the time). In essence, this amendment incorporates the provisions of H.R. 1891 into the bill. It was approved despite the opposition of both the chairman of the subcommittee, Rep. Barton (R-TX), who asked that the amendment be withdrawn, and the ranking minority member, Rep. Boucher (D-VA). Others voting against our position were Reps. Dingell (D-MI) and Waxman (D-CA). Our supporters were Reps. Bryant (R-TN) and Gordon (D-TN). who led the charge and defied their respective leaders, joined in the vote by Reps. Largent (ROK), Burr (R-NC), Shadegg (R-AZ), Radanovich (R-CA), Bono (R-CA), Walden (R-OR), Doyle (D-PA), John (D-LA), and Luther (D-MN). Why is this important? Phase-in of the ultra-low-sulfur diesel rule could force many retailers to install an additional set of diesel tanks for use during a limited period.

Opposition to the amendment came from some refiners (who want more time to comply) and from environmentalists. The environmentalist argument wasn't against the actual effect of the bill - which will lead to environmental gains but rather that the Bush Administration might use the opportunity of a re-write of the diesel sulfur rule to make other changes which would not be environmentally sound.

We expect an attack on this amendment when the full Energy and Commerce Committee takes it up on Wednesday of this week. The committee will begin with opening statements on Tuesday evening (while SIGMA members are in town for our Summer Committee Meetings!), and will get down to actual markup on Wednesday. Our lobbyists will be on a "full-court press", along with those of NATSO, PMAA, and NACS, to defend the amendment and keep it in the bill.

Once again, we need your help! Our efforts will be much more successful if you AGAIN write to those members of the committee in whose Districts you have outlets. The "call to action" and all the tools you will need are attached. You may also log onto the SIGMA website at www.sigma.org for help in completing these messages.

SUMMER CMTE MEETINGS

With all the activity in Washington, there are some changes to our Summer Committee schedule. The N PRA group, with which our Legislative Committee meets jointly, needs to leave early. For that reason, we will compact our joint luncheon and the joint meeting into a single event, with a working lunch and meeting starting at 12:00 noon.

SMALL REFINERY TAX CREDITS

Last Wednesday, SIGMA filed a formal statement with the Senate Finance Committee in support of tax credits for small refineries. Our statement endorsed tax incentives, such as an environmental upgrade tax credit, to assist companies with small refineries in making mandated environmental upgrades. We also urge that the definition of "small refiner" be clarified to ensure that the 1,500employee standard would count only employees in the refining part of the business. SIGMA did not testify at the hearing, which was held Tuesday and Wednesday. However, Ron Williams of Gary Williams Energy, a SIGMA Associate Member, did speak, on behalf of a coalition of small refiners, and made many of the same points we made in our written presentation. The Chairman of the committee, Sen. Baucus (D-MT), says markup of energy tax legislation will take place after the August recess.

NON-CORN ETHANOL?

At the same Senate Finance Committee hearing, the Renewable Fuels Assn., representing ethanol interests, testified in support of extending the ethanol tax credit, which is set to expire in 5 or 6 years. RFA touted the benefits of corn-based ethanol. However, a major environmental group testified in favor of using the ethanol tax credit to promote ethanol produced from agricultural wastes and from perennial crops rather than from corn, and to encourage ethanol producers to improve their efficiency. The Natural Resources Defense Council based its position on an assertion that the benefits from corn-based ethanol are minimal, given the amount of energy used to produce the corn.

TRIBAL NON-TAX AND SPEND

Under current campaign finance law, Indian Tribes are considered a "person" rather than a corporation, but are not a "individual". Thus, they MAY make campaign contributions, but are not subject to the $25,000 limit on total campaign contributions. The campaign finance bill that was before the House of Representatives last week would have made the matter worse: doubling the allowed contribution per candidate from $1,000 to $2,000, without closing the tribal loophole, would have meant even more tribal casino profits and proceeds from non-taxed gasoline and cigarette sales could be plowed back into electing sympathetic Congressmen and Senators.. An amendment offered by Rep. Simmons (PCT) to close that loophole was blocked by the Republican-controlled Rules Committee. As a result, SIGMA joined with NACS and PMAA in sending a letter urging that the rule allowing for debate of campaign finance reform be defeated. NACS was the leader in this effort. Both NACS and PMAA do ratings of Congressmen's voting records, and both indicated this would be a "key vote" used in their ratings - a move that angered some of the industry's allies in Congress, but clearly made the point about how strongly we feel about the issue. We don't want to sound like the rooster taking credit for the sun rising, as many other more-powerful forces were in play, but the rule WAS defeated, and our position couldn't have done anything but help in that outcome. We are hopeful that, when campaign finance reform comes up again (if it does), the tribal loophole will be closed.

STAGE II EQUIPMENT

Some 27 states require Stage II Vapor Recovery in some or all of their territory. All of them except Missouri require that the equipment be certified by the California Air Resources Board (CARB). In most states, the Stage II # mandate is either directly required by federal law or is part of a State Implementation Plan (SIP) which must be approved by EPA. Thus, when CARB announced that it was instituting new Stage II requirements and de-certifying all existing Stage II equipment, there was some question about whether EPA and the states would mandate that all Stage 11 nationwide meet the new California standards.

EPA has answered for their part: states may continue to accept existing Stage II equipment, or they may require equipment meeting the new California standards, or they may do a combination of the two. It is not yet clear what all states will do, but northeastern states are headed for a partial upgrade option: mandating swivel adapters on fill pipes, improving spill containment boxes, requiring pressure-vacuum caps at all gas stations, and addressing on- # board canister compatibility for all vacuum assist Stage II systems.

In a letter to northeastern states, EPA points out that Stage II will be supplanted when on-board canisters are fully in effect, so mandating major changes to Stage II at this point would not be an efficient use of resources. Backing up this point, EPA approved revisions to the Pennsylvania SIP which call for elimination of Stage 11 after 2010 if onboard canisters move forward as scheduled. EPA also approved allowing a car-rental agency in San Francisco, which rents only canister-equipped cars, to skip Stage II at its refueling facility. Someday, Stage II may be a thing of the past!