December 10, 2001

DEMOCRATS UNVEIL ENERGY PROPOSAL; REPUBLICANS ACT TOO

Last Wednesday, Senate Majority Leader Daschle (D-SD) introduced S. 1766, the Democratic alternative version of energy legislation. At introduction, the sole co-sponsor was Sen. Bingaman (D-NM), the chairman of the Senate Energy Committee. The 388-page bill has so many provisions it’s hard to characterize, except to say it generally focuses more on conservation than on production of additional energy. It has some provisions marketers would like to see enacted, some which marketers would strongly oppose, and is silent in other areas we care about. Key provisions and missing topics:

* MTBE would be banned in 4 years.
* States would be allowed to opt out of the oxygenate mandate for RFG within 90 days of enactment of the law, or within 90 days of becoming part of the RFG program.
* EPA would be required to set up a program to ensure that the market share of ethanol and bio-diesel would increase, from the current 1.6 or 1.7 billion gallons per year to 2 billion gallons in 2003 and 5 billion gallons in 2012, although states would be allowed to petition for a lowering of those levels. This would be mostly a refiner-level mandate, with a credits trading program.
* An additional $200 million would be allocated in 2002 from the LUST Trust Fund, although it is unclear if this would be for use by EPA or the states. The funds are authorized for MTBE cleanups, but the bill also includes SIGMA-supported language allowing LUST funds to be used for enforcement of the tank rules.
* EPA would be allowed to ban any fuel or additive if it were found to contribute to air or groundwater pollution.
* “Non-classified” ozone attainment areas would be allowed to opt into the RFG program – something which is not allowed under current law.
* Funds would be provided for a study of ETBE (ethyl tertiary butyl ether – akin to MTBE but made from ethanol rather than from methanol).
* Grants of $250 million per year would be authorized in each of the next 3 years to provide incentives for producers of MTBE to convert to making other additives.
* There would be a significant “anti-backsliding” provision to ensure that none of the MTBE/oxygenate provisions result in a decrease in air quality.
* The bill has no provision to allow for oil exploration in the Arctic National Wildlife Refuge (ANWR).
* The bill also has no provisions for any increase in vehicle fuel economy standards (CAFE standards), but it has a “placeholder” where such a provision could be inserted if negotiations result in an agreement to raise them.

Sen. Daschle does not expect the Senate to take up his bill or any other energy legislation this year, but says it will be taken up fairly early in the 2002 session of Congress.

Meanwhile, Republicans abandoned their attempt to attach their own energy legislation to a Railroad retirement bill last week. Virtually all Republicans voted against their own proposal, after it became clear it was destined to fail anyway. They promise to continue to attempt to force action on the issue.

RFG SUMMER TRANSITION

The EPA proposals for winter-to-summer RFG transition were published in the Federal Register on Dec. 3, triggering a series of deadlines for action. If anyone requests a hearing, it will (theoretically) be held on Dec. 24 – although the recent Presidential proclamation making 12/24 a federal holiday this year may affect that date. At this point, neither SIGMA nor anyone else we know of plans to request a hearing. The deadline for written comments, unless there is a hearing, will be Jan. 2. SIGMA is still developing our position; we will probably submit written comments.

ECONOMIC STIMULUS

A joint House/Senate “leadership conference” has been appointed to work out differences between the parties and the Houses on economic stimulus. While there have been meetings, so far the only things discussed have been procedural – in essence, the size and shape of the negotiating table – with no substantive negotiations yet begun. Everyone considers this “must-pass” legislation before adjournment, which was supposed to happen the end of this week. New adjournment prediction? 12/21!

CARGO TANK RULES PROPOSED

The Dept. of Transportation (DOT) has proposed new rules for cargo tank motor vehicles. Some of the provision actually provide relief for marketers, although that is not the overall thrust. Among the key provisions:

* Drivers hauling combustible materials such as diesel fuel and heating oil would be required to have hazardous materials (HAZMAT) training – something not currently required.
* Cargo tank vapor recovery equipment annual testing would be subject to either EPA Method 27 or DOT leak test requirements, but not both tests (as many inspectors interpret current regulations).

In addition, there are a number of new rules related to testing of valves, new signage, and a number of new requirements for LP gas tanker trucks.

A copy of the proposed rules is supposed to be available at http://dms.dot.gov, although we had difficulty finding it. Comments on the proposals are due by Feb. 4, 2002. We will be distributing a memo from SIGMA’s attorneys, and will wait to see member reactions before deciding if SIGMA should submit comments.