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Sunday, October 09, 2005

Building New Refineries - A New Law

The new energy bill - H.R.3893 was passed narrowly by a 212 - 210 margin with no Democrats voting yes in the final count. A 5-minute scheduled vote turned into a 40-minute scramble by Republicans to garner the required votes among Democrat complaints. During that time the Republicans managed to change fellow Republican “no” votes to “yes”, but the few Democratic “yes” votes converted to “no” during the process. 13 Republicans joined the Democrats and voted against the bill.

Rep. Joe Barton, R-Texas, said the bill streamlines the maze of permitting requirements for expanding or building refineries and directs the president to single out federal land where a refinery may be built. The changes could lead to construction of a new U.S. refinery within a year, he predicted.

The bottom line is this bill reduces E.P.A. regulations that have kept oil companies from desiring to build new refineries since the 1970’s. It encourages them to revitalize existing refineries that are no longer in operation.

This bill reduces the number to six of "boutique" fuels, or special mixes, formerly required. This is apparently, contrary to news releases, a portion that would be temporary and enacted by the President at his discression after “natural disasters” that disrupt the nations fuel supply.


* This bill allows the President to name closed military bases for land use to build refineries.

* This bill instructs the Federal Trade Commission to investigate oil companies for “price gouging” in the aftermath of hurricanes Katrina and Rita.

* This bill streamlines the beaurocracy involved in obtaining federal approval to build a refinery. (A couple refinery projects have been on hold for decades due to this issue.)


The Democrats, and fellow opponents, argue against this bill that the legislation fails to address the rising cost of natural gas, or deal with high prices at the pump. Instead it will allow the oil industry to avoid environmental regulations and force states and local communities to accept refineries they don't want.

Rep. Sherwood Boehlert, R-N.Y, who voted “no”, says in opposition "The bill weakens state and federal environmental standards ... and gives a break to wealthy oil companies while doing little or nothing to affect oil prices. With prices soaring, oil companies now have all the profits and incentives they need to build new refineries without government help.”


This bill, as far as I can tell, also begins federal government involvement in the oil business.

* Sets guidelines for federal-state regulatory coordination, including financial, technical and legal assistance, to facilitate refinery siting, construction, expansion, or operation.

* Authorizes the Secretary to enter into contracts with non-federal entities that the Secretary determines to be the first non-federal entities to enter into firm contracts after enactment of this Act to construct new refineries in the United States or refurbish and return to commercial operation existing but nonoperating refineries.

* Establishes in the Treasury the Standby Refinery Support Account to implement refinery revitalization.

* Provides for discounted sales of royalty-in-kind oil to qualified small refineries.

* Requires Federal Energy Regulatory Commission (FERC) authorization to site, construct, expand, or operate a crude oil or refined petroleum product pipeline facility in interstate commerce.

* Authorizes the Secretary of Energy to drawdown and sell petroleum products from the Strategic Petroleum Reserve to fill it to its maximum authorized level.

* Establishes the SPR Expansion Fund in the Treasury to accomplish such purpose.

This leaves the question … are the oil companies that have made record profits over the last several years, (doubled over the last 2), getting our tax dollars to …

* Build these refineries? (Or to refurbish closed refineries?)
* Update and expand existing refineries?
* Are they receiving the land at no cost?
* Reduce their cost of crude oil?

Or are we seeing the beginnings of a new oil company? The U.S. Government Oil Company (USOC) with a “stop-and-rob” station coming to your town soon? The logo can be an Eagle sitting on an oil derrick that is spewing out money.

Maybe we will see in the long run it is just small federal grants, and loans to expedite the construction of these needed refineries. Maybe it is intra-bureau funds to pay government employees, and finance improvements to the offices. Nevertheless, it doesn’t seem like it.

Maybe this will be a topic debated while in the Senate. Maybe I will contact my Senator and ask them if this is what is happening. Maybe you should too.



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