April 15, 2002

ETHANOL INTERESTS WIN FIRST TEST VOTE IN SENATE

Congress returned to session last week, and the Senate returned to work on the big Energy Bill. Action was taken on two amendments of concern to marketers, and action is likely on two other such amendments this week.

An amendment by Sen. Feinstein (D-CA) would have “weakened” the Renewable Fuel Standard (RFS – the ethanol mandate) by delaying it for one year, and by requiring the EPA Administrator to act more quickly in the future in responding to any governor’s petition to waive the RFS. SIGMA supported the amendment, which was defeated on a recorded vote of 61 to 36, with 3 not voting. Those on “our side” on this vote should be thanked:

Allard (R-CO)                  Domenici (D-NM)                      Reed (D-NV)

Allen (R-VA)                    Enzi (R-WY)                             Santorum (R-PA)

Bennett (R-UT)               Feinstein (D-CA)                      Schumer (D-NY)

Biden (D-DE)                  Hutchison (R-TX)                      Sessions (R-AL)

Boxer (D-CA)                  Inouye (D-HI)                          Shelby (R-AL)

Campbell (R-CO)            Kennedy (D-MA)                      Smith (R-OR)

Cantwell (D-WA)            Kohl (D-WI)                             Snowe (R-ME)

Clinton (D-NY)                Kyl (R-AZ)                                Specter (R-PA)

Collins (R-ME)                Leahy (D-VT)                           Thompson (R-TN)

Corzine (D-NJ)               McCain (R-AZ)                         Torricelli (D-NJ)

DeWine (R-OH)              Murray (D-WA)                       Warner (R-VA)

Dodd (D-CT)                  Nickles (R-OK)                         Wyden (D-OR)

Those not voting were Gramm (R-TX), Gregg (R-NH), and Miller (D-GA). All other Senators voted against SIGMA’s position on this issue.

Another amendment on the ethanol mandate has not been voted on yet. Introduced by Sen. Schumer (D-NY), it would delete the RFS entirely. Given the negative vote on the more-moderate Feinstein amendment, it is highly unlikely the Schumer amendment could pass. At this point, it might be better that the amendment not even come up for a vote, since victory is so unlikely. Our best hope now of killing the RFS is to have it removed from the bill in a Senate-House Conference Committee set up to work out differences between the bills passed by the two houses. The House version of the Energy Bill does not include an ethanol mandate of any type.

In response to currently -volatile gasoline prices (and before the price collapse last Friday), Sen. Durbin (D-IL) introduced an amendment to create a “Consumer Energy Commission”. The purpose of the commission is to investigate “significant price spikes since 1990 in major U.S. consumer energy products, including electricity, gasoline, home heating oil, natural gas and propane.” The commission will be appointed partly by the President and partly by leaders of both parties in both houses of Congress, and would be mandated to include 5 representatives of consumer groups, 5 representatives of “the energy industry”, and one representative from the Dept. of Energy. That amendment was passed, meaning it is now part of the Senate Energy Bill.

Republicans delayed a vote on their amendment to allow drilling for oil in that Arctic National Wildlife Refuge (ANWR) until next Tuesday. They are trying to put together a “deal” to garner additional votes, by authorizing some of the royalties from Alaska drilling to be used to pay for pensions of retired steelworkers. (This kind of deal on unrelated matters is called logrolling or vote swapping.) At this point, it is unclear that such a deal would even win more votes than it would cost. ANWR drilling is in the House version of the bill, so it could end up in the final bill even if initially defeated in the Senate.

Whether final action on the Energy Bill will be taken by the Senate this week is questionable. While Majority Leader Daschle (D-SD) has indicated no desire to remove the bill from consideration, he is concerned that the debate is taking so long, and has said his patience won’t last forever.   

UNDERGROUND TANK BILL

SIGMA and our allies had a series of meetings last week with both Senators and Representatives, urging action on Sen. Chafee’s UST bill, with an amendment to deal with the uses of federal LUST Trust Fund money. We got a lot of interest and favorable reactions. We are hopeful there will be hearings in both Houses either later this month or in early May, with the chance of action soon thereafter.  

REACTIONS TO VOLATILITY

Over the past few weeks, petroleum prices have seen great volatility as both buyers and sellers reacted to the prospect of war with Iraq, a decision by Iraq to cut off oil exports, instability and loss of production in Venezuela, and the prospect that the Israeli-Palestinian conflict could lead to instability and conflict in much of the oil-producing parts of the Middle East. At week-end, with the ouster of the President of Venezuela and the prospect of a less belligerent leadership returning to that country, oil prices plunged. Developments over the weekend suggest we may be in for more of a roller-coaster ride on prices this week. Predictably, the wholesale price of gasoline has closely followed the oil price pattern.

Also predictably, politicians and their advisors got into the action. Here’s a sampling of what was being said and done:

President Bush, in response to a question, told the Wall Street Journal last Monday that he would “look at all options” including a reduction in the federal gasoline tax. Later in the week his aides said he is not considering such an action.

The Energy Department announced re-opening of a toll-free “hot line” for reporting “price gouging”, with cases to be sent to the Federal Trade Commission for investigation.

Energy Secretary Spencer Abraham held meetings with consumer groups, and also with petroleum groups. For the latter meeting, on Thursday, SIGMA Executive Vice President Ken Doyle and attorney Tim Columbus were joined by representatives from other refining and marketing groups (API, NPRA, and PMAA) as well as NACS. Abraham told the group it was up to industry to get the word out explaining why gasoline prices are volatile.

The General Accounting Office (GAO), the investigative arm of Congress, is now investigating the effect of oil company mergers over the past decade on gasoline prices and supply.

As reported last week, the Federal Trade Commission is undertaking a major study and a public conference on “Factors that Affect Prices of Refined Petroleum Products”, scheduled for May 6-9.

As reported on page one of this report, the Senate added a provision calling for a “Consumer Energy Commission” to the Energy Bill currently under consideration.

Government economists have alternately said that fuel price increases will not do much harm to the economy; that price increases may trigger a new round of inflation; and that price drops could be a boon to the economy.

We can’t help but wonder: will the politicians be as interested in downward price volatility (like that seen last Friday, if it continues) as they have been in upward price volatility?  

SUPERFUND TAX

For the past several years, Republicans in Congress have blocked the reinstatement of the Superfund tax, insisting that Superfund be reformed before the tax is imposed. The Bush Administration has supported that position. However, in testimony before a Senate subcommittee last Wednesday, Mariane Horinko, the Assistant Administrator at EPA with responsibility for the program, said that the Administration will consider a change of position for fiscal year 2004. The comment was made in response to a question, not as part of her prepared testimony. Also at the hearing, Senators Chafee (R-RI) and Boxer (D-CA) both stated they favor reinstating the tax. Separately, a bill was introduced in the House last month to reinstate the tax – H.R.4060, by Rep. Pallone (D-NJ). 

CORRECTIONS AND ADDITIONS

In our last SIGMA Weekly Report we mentioned a statement made by William Greehey of Valero Energy before NPRA, in which he supported import fees for foreign-refined petroleum products. In that report, we incorrectly referred to him as the new Chairman of NPRA. He is not the Chairman, and does not even serve on the NPRA Board. He was merely making the keynote address to the group. We apologize for the error. The new NPRA Chairman is Duane Guilliam of Marathon-Ashland.

In an earlier SIGMA Weekly Report, we reported on some statistics from the Office of Management and Budget (OMB) on the costs of government regulations. Those statistics suggested that the economic benefit of most federal regulations, including EPA regulations, significantly exceeded the costs. What that report did not look at was the distribution of the costs. A report by the Office of Advocacy of the US Small Business Administration in 2000 pointed out that the costs of regulations are disproportionately high for small businesses – 60% higher for firms with fewer than 20 employees compared with those with over 500 employees. This gives the numbers a different perspective.