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Ryan’s Fuel Legislation Passes House, Bill Addresses Soaring Prices, Reduces Boutique Fuels with Six-Fuel Federal Slate

Bill Also Encourages Construction of New Refineries, Requires FTC Investigation of Gas Prices in Aftermath of Hurricane Katrina

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October 07, 2005 | Kate Matus (202-226-7326) | comments

WASHINGTON – The U.S. House of Representatives today approved legislation that would build on the progress made in the energy bill signed into law this summer by calling for a six-fuel slate to shrink the number of boutique (highly specialized) fuels and streamline the nation’s fragmented gasoline system – legislation that First District Congressman Paul Ryan has fought for over the past several years to provide relief to Wisconsin drivers. 

Ryan, a member of the Gas Price Task Force, co-authored the reduction of boutique fuels as part of this legislation, in order to improve flexibility and prevent avoidable fuel shortages and the price spikes that accompany them. In addition, boutique fuel reforms are needed to bring competition into the marketplace so refineries that currently produce unique fuels will not have the leverage to price fuels artificially high at the expense of the consumer. The bill also includes other provisions to address soaring gasoline prices, such as encouraging the construction of new refineries to increase supply, promoting new pipelines, and creating federal penalties for price gouging when natural disasters occur. The measure, H.R. 3893, passed the House by a vote of 212-210 and awaits action in the Senate. 

“This summer’s energy bill contained our legislation to begin the project of simplifying our gasoline system to help prevent fuel shortages and price spikes. Today’s legislation finishes the job by prescribing a federal fuels list of six gasoline and diesel fuels, instead of the current cobbled-together patchwork of many specialized blends. Standardizing our gasoline system must be part of the solution to skyrocketing prices. It will give us the flexibility we need when there’s a supply emergency and reduce the ability of refineries that produce boutique fuels to manipulate the marketplace,” Ryan said. “Clean air and affordable gasoline can go together, but we need to move ahead with common-sense reforms to make it happen.” 

The 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. 

Throughout the nation, areas have chosen their own unique blends, leading to fragmentation of our nation’s fuel system and tight supply conditions that foster price spikes, particularly if there is a supply disruption affecting an area’s particular blend of fuel. For example, if there is a refinery fire or natural disaster 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. 

Ryan’s provisions in the energy bill that became law this summer stopped this problem from worsening by capping the number of boutique fuels at the current number and codified the Environmental Protection Agency’s (EPA’s) authority to issue temporary waivers during supply emergencies. It also required the EPA Administrator and Secretary of Energy to conduct a study and make recommendations on a federal fuels system. 

Today’s legislation includes Ryan’s original policy of requiring the EPA and the Department of Energy (DOE) to identify a limited slate of fuels, in this case, a total of six fuels – four gasoline fuels and two diesel fuels – for a Federal Fuels List that states choose from to meet their Clean Air Act fuel needs. (California or states dependent on refineries in California for gasoline and diesel fuel are excepted.) Then EPA, in consultation with the DOE, will develop a plan to harmonize the currently approved fuel blends in use around the country with those blends included on the Federal Fuels List. Under this legislation, the plan must be fully implemented by December 31, 2008. As a safeguard, if DOE determines that the list of fuels selected by EPA and DOE will result in a reduction in supply, EPA and DOE will report that finding to Congress and suspend the implementation of the list. 

Beyond limiting boutique fuels to improve supply, today’s legislation – H.R. 3893, the Gasoline for America’s Security Act, seeks to lower gasoline prices by taking other steps to increase supply and get to the bottom of recent price spikes. Among its provisions, H.R. 3893:

  • Encourages construction of new refineries through regulatory relief and risk insurance. No new refineries have been constructed in the United States since 1976, and increased capacity is needed to improve our fuel supply.

  • Directs the President to designate sites on federal lands, including no less than three closed military installations, that are appropriate for siting a refinery. Prohibits refinery designation on lands within the National Park System, National Wilderness Preservation System or designated as a National Monument. 

  • Allows a locality to apply for a date-certain extension of certain clean air requirements when it can be demonstrated that downwind pollution from another area is to blame. 

  • Establishes a new federally-directed implementation process for siting crude and petroleum product pipelines. 

  • Promotes conservation through a program to encourage the use of carpooling. 

  • Requires the Federal Trade Commission to investigate nationwide gasoline prices in the aftermath of Hurricane Katrina. 

  • Makes it a violation of federal law to price gouge for gasoline or diesel fuel during a 30-day period in the event of a major disaster. This does not affect anti-gouging measures already in place in a number of states. 

  • Requires the Federal Trade Commission to report to Congress on the price of refined petroleum products on the New York Mercantile Exchange and the effects of such price on trading. 

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