Statement of Senator Jim Inhofe, Chairman
Clean Air Subcommittee
Hearing on Sulfur Levels in Gasoline
Tuesday May 18, 1999

Today is the first of two hearings this week on the EPA's proposed new standards for sulfur levels in gasoline. The sulfur standard is part of the new proposed Tier Two Auto Emission standards. These standards were proposed on May 1st and are expected to go final by the end of this year.

I said expected to go final by the end of this year because the EPA has a lot of work ahead of itself if they plan on accomplishing this. For over a year now this Subcommittee and my Office have raised a number of issues to the EPA regarding the sulfur standards, and for the most part they have ignored our issues and concerns in their proposed rule. The most they have done is to ask for comments on a few of the issues, they did not offer solutions or a real proposal. This is most evident in the case of the small refinery issue.

At this point I would like to note a few of my concerns. I hope that today's witnesses can address these issues, and on Thursday I hope to hear a response from the EPA.

1. Small Refiners - The EPA decided to provide very limited relief to small refiners based upon the number of employees of the entire corporation, not just the refinery or energy side of a company. They choose 1500 employees as the cut-off. This ignores companies which have other non-refinery related businesses such as hotels and convenience stores. There is also one company with 1550 employees. These examples were given to the EPA months ago.

They also ignored defining the size of a Refiner by production volume, which has been used by the Department of Energy and is much more reliable when determining the available resources for capital improvements.

2. Small Refineries - In addition to small companies the EPA has ignored small facilities owned by larger corporations. The same economies of scale that a small company much consider when deciding whether to make capitol investments apply to small facilities when owned by large corporations. When a large corporation owns several large facilities and one 30-40 thousand barrel-a-day facility, they will be unlikely to spends the millions of dollars in capital investments on that small facility. The effect will be the closing of many small facilities owned by the majors. While this probably will not be life or death for the majors, it will be life or death for the local employees and in particular the small towns where these refineries are located. This was also pointed out to the EPA and ignored.

3. Phase-in Time - The EPA is phasing the automobile standards in over four years starting in 2004, yet all but the smallest 18 refineries will be forced to undergo their large investments well before 2004, and in order to undertake what limited relief the small companies have will probably require significant investments by them as well. Can this be done in a less disruptive manner, perhaps with the same lead-in time given to the auto manufacturers?

4. Energy Supply - because of the effect on small refiners and small refineries and the lead-in time for major equipment changes, we can expect to see energy supply disruptions. One example is the availability of the equipment. For the EPA's preferred technology there are only two vendors and to date they have only installed the equipment at one refinery. Now the EPA and State permitting process alone takes one to two years to complete. The EPA has promised to shorten this time to six months yet they have requested no additional employees or funds in next year's budget to get this done. This means that either the permit process will not change or permits for other projects and industries will get longer as employees and resources are pulled off to work on this.

These are just some of the issues that I have raised to the Administration over the last year which have not been addressed in the proposed rule. Because of their failure to deal with these hard issues in the proposal I have decided to move forward with legislation which will address sulfur levels in fuel. I intend to use the hearings this week to help gather information before we starting drafting the legislation.

I look forward to hearing from today's witnesses.