July 23, 2001

MAJOR BATTLE LOST ON LOW-SULFUR DIESEL

SIGMA and our allies (PMAA, NATSO, and NACS) lost in the full House Energy and Commerce Committee what we had gained the previous week in Subcommittee. By a vote of 31 to 20, the committee approved an amendment to strip from the overall energy bill a provision to ban the phase-in of ultra-low-sulfur diesel fuel.

A week ago, in subcommittee, we had succeeded in getting the body of the Bryant/Gordon bill incorporated into the overall Energy Committee's energy bill. The vote had been close, and was adopted over the objections of both the Chairman and Ranking Minority Member of the committee. As became clear last Wednesday, however, we only succeeded in waking a "sleeping giant" - our victory brought out all sorts of forces in opposition to us:

• The White House, EPA, and the Department of Energy actively opposed us, fearing an embarrassment to the White House, which had affirmed the rule allowing a phase-in of ultra-low-sulfur diesel only last February.
   

• The American Petroleum Institute and a number of refiners - most visibly Exxon Mobil, Marathon Ashland, CITGO, and Phillips. They want the "added flexibility" of a phase-in for their refineries, even though it will mean additional tank requirements at retail.
   

• All of the major environmental groups, Although our position would be more favorable to the environment, these groups are fearful that re-opening the rule-making process for ultra-low-sulfur diesel might result in a weaker (environmentally) rule overall - a chance they didn't want to risk for the relatively small environmental benefit of our position.
   

• The chairman of the committee, Rep. Tauzin (R-LA), and the ranking minority, member, Rep. Dingell (D-MI), plus numerous state and local environmental officials.

Actually, it is quite amazing that we got as many votes as we did, considering the opposition. We even carried a majority of Republicans on the committee (16 to 11). But committee Democrats were almost solid in their opposition (20 to 4), and that's what did us in. Among the Democrats voting against us were two who had voted with us in subcommittee - Barrett (D-WI) & Luther (D-MN), and even two sponsors of the Bryant/Gordon bill itself - Stupak (DMI) & Barrett (D-WI)!

Although this was clearly a loss, there are some positives that come from it: we now know who marketers' friends are on the committee, we (the 4 marketer groups) worked well together, we collectively made an excellent showing before the committee despite overwhelming opposition, and we gained some respect from refiners, who recently may have dismissed marketers as a political afterthought. It remains to be seen if this effort can be resurrected in the Senate, and whether the White House, the Dept. of Energy, or EPA will try to address marketer concerns in other ways.

The vote on the amendment was as follows:

16 Republicans voting RIGHT (against the amendment):
Bilirakis (R-FL)	Gillmor (R-OH)
Deal (R-GA)	Largent (R-OK)
Burr (R-NC)	Whitfield (R-KY)
Ganske (R-IA)	Norwood (R-GA)
Shimkus (R-IL)	Shadegg (R-AZ)
Pickering (R-MS)	Blunt (R-MO)
Bryant (R-TN)	Buyer (R-IN)
Radanovich (R-CA)	Walden (R-OR)
4 Democrats voting RIGHT (against the amendment):
Gordon (D-TN)	Doyle (D-PA)
John (D-LA)	Harman (D-CA)
11 Republicans voting WRONG (for the amendment):
Tauzin (R-LA)	Barton (R-TX)
Greenwood (R-PA)	Cox (R-CA)
Cubin (R-WY)	Wilson (R-NM)
Ehrlich (R-MD)	Bass (R-1H)
Pitts (R-PA)	Terry (R-NE)
Bono (R-CA)
20 Democrats voting WRONG (for the amendment):
Dingell (D-MI)	Waxman (D-CA)
Markey (D-MA)	Hall (D-TX)
Towns (D-NY)	Pallone (D-NJ)
Deutsch (D-FL)	Rush (D-IL)
Eshoo (D-CA)	Stupak (D-MI)
Engel (D-NY)	Sawyer (D-OH)
Wynn (D-MD)	Green (D-TX)
McCarthy (D-MO)	Barrett (D-WI)
Strickland (D-OH)	Capps D-CA)
DeGette (D-CO)	Luther (D-MN)

MORE ENERGY BILLS

All House committees having jurisdiction over energy-related issues were in a rush last week to complete action on their bills. The Energy & Commerce bill had other issues of interest to marketers, and was ultimately approved on a vote of 55 to 1. Defeated was an attempt to include in that bill a provision allowing states to opt out of the oxygenate requirement in Reformulated Gasoline (RFG). The vote on that amendment was 33 to 22. While SIGMA generally endorses the approach, we had not lobbied actively for the provision.

The House Resources Committee has approved opening the Arctic National Wildlife Refuge (ANWR) to oil and gas exploration.

The House Ways and Means Committee approved a $33.5 billion bill providing tax incentives for energy research and development over the next 10 years. Included was a SIGMA supported provision to allow small refiners to expense (rather than depreciate) 75% of the cost of environmental upgrades for producing-ultra-low-sulfur diesel and take a tax credit for the other 25%, along with a SIGMA-led change in the definition of "small refiner" to specify that the maximum number of employees (1,500) applied only to refining-related employees. This increases by some 12 to 14 the number of refiners eligible for the tax incentives. The same bill deletes the provision in current law requiring that any terminal offering undyed (taxed) kerosene also offer dyed kero; SIGMA supported the repeal, but also watched carefully to ensure the provision didn't get widened to reopen kerosene to tax cheating. This bill passed out of committee on a largely party-line vote, with most Democrats in opposition. Their reason: the bill is outside of the budget, and no provisions are made to "pay for" it through other spending cuts or revenue increases.

Bills from these three committees, as well as one from the House Science Committee, will be rolled into a single bill to be acted on by the House of Representatives sometime within the next couple of weeks. The Senate is moving more slowly on energy legislation.

FUEL CELL VEHICLES

The House Ways and Means energy tax bill provides a $2 billion tax credit for fuel cell vehicles. Of interest to marketers, automakers are in the process of lining up behind either gasoline or methanol as the hydrogen source for fuel cells. Thus far, General Motors, Toyota, Volkswagen, Nissan, and Renault are giving gasoline priority in their fuel cell research. Ford and DaimlerChrysler believe that methanol is the proper interim step, before moving to pure hydrogen.

EPA APPROPRIATION

Both the House and Senate Appropriations Committees acted last week on EPA's spending authority for the next fiscal year. The House approved $7.5 billion, the Senate $7.75 billion. The Bush Administration had requested only $7.3 billion. The major difference in the Senate bill was adding back in 270 enforcement jobs that Bush had requested be eliminated. Both the House and Senate versions call for $72 million spending from the LUST Trust Fund, which means that is probably the funding level where the LUST Trust Fund will end up.

IRAQI OIL

ABC News reported last Friday that as much as 90% of the oil exported from Iraq is coming to the United States. The reason: Iraq's oil is much in demand here due to its low sulfur content.

SURVEY REMINDER

Your company recently received a Technology Survey from Gerke & Associates. SIGMA is participating in this survey and asks that our members respond to it. Although responses were requested by July 18, they are still being accepted. PLEASE RESPOND IF YOU HAVEN'T YET!

OTHER REMINDERS

The API "Recommended Practice" for loading and unloading tanker trucks is available for purchase by SIGMA members at a discount. Visit our Website, www.sigma.org  to click through to API and get the discount.