Following the completion of a House-Senate conference where differences between the two chambers’ versions of a comprehensive energy bill were resolved, the U.S. House of Representatives today passed consensus energy legislation that includes the provisions of a boutique fuels bill (H.R. 1493) introduced by First District Congressman Paul Ryan earlier this year. Ryan’s proposal will stop “boutique” – in other words, highly specialized – fuels from multiplying, start the process of streamlining the nation’s fragmented gasoline system, and help prevent the price spikes that have plagued Wisconsin and other areas.
Ryan, Rep. Mark Green, and other members of the Wisconsin congressional delegation have been fighting for over five years to bring common sense to the nation’s fuel system and address the problem of seasonal and sudden gasoline price spikes that are due, in part, to the unique type of reformulated gasoline that must be used in certain Wisconsin counties during the summer. With House passage of the final version of the energy bill, by a vote of 275-156, their latest legislative proposal to tackle the boutique fuels problem is on track to become law, as the Senate is expected to pass this legislation and the President is expected to sign it.
The gasoline provision that Ryan succeeded in placing in the energy bill would halt the proliferation of boutique fuels and require the Environmental Protection Agency (EPA) and the U.S. Department of Energy to submit a study to Congress within a year recommending legislative changes to create an improved federal fuels system that maximizes supply, enhances efficiency, decreases price volatility and promotes air quality. It would also codify the EPA’s authority to issue temporary waivers during supply emergencies.
“I have been fighting for five years to bring some common sense to our gasoline supply system. Finally, with the passage of this legislation, we are about to take the first critical step toward standardizing fuel blends and preventing self-inflicted price spikes,” Ryan said. “Wisconsin drivers know all too well the consequences of the current system – a patchwork of specialized fuel blends that sets us up for unnecessary supply shortages and price increases. Streamlining the system will help us stabilize our prices, and give us greater flexibility when unforeseen breaks in supply occur. And we don’t have to sacrifice air quality to fix this problem. Clean air and affordable gas should go together.”
The growing number of highly specialized fuels around the nation (and the supply shortages and artificially high prices that tend to accompany these boutique fuels) are an unintended consequence of the 1990 Clean Air Act Amendments. As a result of these amendments, areas found in noncompliance with certain ozone standards use clean-burning fuels in an effort to improve air quality, but there is no standardized menu of fuels from which they must select.
Under the current system, each area can choose its own unique blend, leading to fragmentation of our nation’s fuel system and very tight supply conditions that foster price spikes, particularly if there is a refinery fire, pipeline break or other supply disruption affecting an area’s particular blend of fuel. For example, if there is a refinery fire that hinders the production of the unique type of reformulated gasoline that Southeastern Wisconsin uses, gas stations in the area cannot readily draw on other types of gasoline from neighboring regions and the price of gas rises. Nationwide, there are currently 18 different fuel types and around 45 different fuel blends, once the various octanes are factored in.
In addition, because there are limited suppliers of a given specialized fuel type, refineries who produce boutique fuels possess significant power to manipulate the marketplace and have the ability to charge artificially high prices.
This problem will worsen in the near future if nothing is done because, under new EPA ozone standards, most or all of 257 new counties (in addition to the current 217 counties or portions of counties) around the nation are in non-attainment of the ozone standards. If these new areas choose their own unique fuels to help them come into compliance with the EPA regulations, supply will grow even more balkanized.
Ryan’s plan, passed as part of the energy bill conference report today, will do the following:
Cap the Number of Boutique Fuels. EPA will cap the total number of boutique fuel blends that can be used in the U.S. at the current number. States will continue to have flexibility to adopt new, cleaner fuels to address local air quality concerns, but will have to replace an old fuel to adopt a new one thereby preventing any net increase in fuel blends. Furthermore, states will be directed toward the adoption of fuel blends already used in their region to encourage fungibility (the ability of one area to draw on fuel from another area). This cap will ensure no deterioration in gasoline supply fungibility while maintaining environmental protection and promoting consolidation of blends.
Require a Study on the Impact of Motor Fuels Regulations on the Environment and the Market. The EPA Administrator and Secretary of Energy will conduct a joint study on boutique fuels and make recommendations on a federal fuels system that will (1) maximize the availability of supply; (2) enhance the efficiency of the distribution system; (3) mitigate the volatility in the price of gasoline and diesel fuel, and (4) promote further advances in air quality protection. The study will be submitted to Congress within 12 months with recommendations for legislative changes to create such a system.
Provide the EPA With Limited Authority to Issue Temporary Waivers During Supply Emergencies. In limited circumstances, EPA has granted regulatory “waivers” to help areas respond to supply emergencies by authorizing the use of different types of gasoline. This language will codify EPA's existing authority to assure that waivers are granted based upon narrow and congressionally-authorized criteria and have a minimal impact on environmental protection. Such waivers will apply to the smallest geographic area necessary and will last for a period of 20 days or less.
Ryan voted in favor of today’s energy legislation (the conference report for H.R. 6, the Energy Policy Act of 2005) because it incorporates his plan to stabilize gasoline prices in Wisconsin and throughout the country and because of other important provisions to meet the nation’s energy needs, while protecting the environment. This legislation provides a comprehensive energy policy for the nation, with emphasis on energy production, conservation and incentives for renewable energies.
Among its numerous provisions, the conference report for the Energy Policy Act of 2005:
Improves our nation’s electricity transmission capacity and reliability to prevent blackouts through the adoption of reliability standards, incentives for transmission grid improvements and reform of transmission authorization rules.
Promotes clean and renewable fuels by providing incentives for renewable energies such as biomass, wind, solar, and hydroelectricity.
Bans drilling in the Great Lakes.
Encourages more domestic production of oil by streamlining the permitting process and promoting greater refining capacity through the use of tax incentives.
Provides leadership in energy conservation by establishing new mandatory efficiency requirements for federal buildings and greater efficiency standards and product labeling for battery chargers, commercial refrigerators, freezers, and other household appliances.
Increases the funding authorization for the Low Income Home Energy Assistance Program (LIHEAP) from $2 billion to $5.1 billion.
Encourages the use of alternative power sources, launching a program to get hydrogen fuel-cell vehicles on the road by 2020.