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Congressional Testimony
September 21, 2000, Thursday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2787 words
COMMITTEE:
HOUSE GOVERNMENT REFORM
HEADLINE:
TESTIMONY POTENTIAL ENERGY CRISIS
TESTIMONY-BY: DAN
BURTON , CHAIRMAN
BODY:
September 21, 2000 Opening
Statement Chairman Dan Burton Committee on Government Reform "Potential Energy
Crisis in the Winter of 2000 - Day II" Good Afternoon. Today, we return for our
third day of hearings on problems in our energy markets. We are happy to have
before us the Secretary of Energy, Mr. Richardson, and the head of the EPA, Mrs.
Browner. Welcome back. We also have the Chairman of the Federal Energy
Regulatory Commission, Mr. Hoecker (Hecker). I believe this is Mr. Hoecker's
(Hecker) first time testifying before this committee, and we're glad to have you
here today. Energy prices are soaring all around us --
gasoline, home heating oil, natural gas, electricity. We're
seeing disruptions in supply. It seems like fires are erupting faster than we
can put them out. If this situation continues, every American family across the
country is going to feel the impact this winter and next summer. No one is going
to be immune. Yesterday, I spent some time talking about some of the early
warning signs we're seeing. It's worth taking another look: -This summer, the
price of reformulated gasoline shot up to over $2 a barrel in
the Midwest. -Last winter, the price of home heating oil more than doubled in
New England. This fall, inventories are at a five-year low. Prices are so high
that distributors are going into the winter with empty storage tanks. -The price
of crude oil is now closing in on $40 a barrel. At the beginning of last year,
it was $10. -The price of natural gas has tripled since last spring. In Montana,
electricity rates have gone up 500 percent for industrial users. We heard
yesterday from a businessman who had to shut down his business and lay off 300
people because they couldn't pay their electric bills. -In San Diego,
electricity rates have tripled. Week after week, the State of California has to
turn off the power to many of its large customers to keep the whole grid from
crashing. These problems are mounting one on top of another, and we've seen no
energy policy from this Administration. What is this Administration going to do
to help bring natural gas prices down? What is this Administration going to do
to stop gasoline and home heating oil price spikes? What is
this Administration going to do to restore stability to our electricity grid? We
need to deal with these problems. We need to have an energy policy, and right
now, this Administration doesn't have one. Senior citizens living on fixed
incomes can't afford to see their electric bills double or triple. Low-income
families can't afford to pay twice as much to heat their homes. They simply
can't. We have some fundamental problems in our energy markets. They're supply
and demand problems. Demand keeps growing. Supply isn't keeping up. Our oil
refineries, our electricity generators, our transmission systems are practically
bursting at the seams. All it takes is one small disruption to put the entire
system into a tailspin and send prices soaring. We saw that this summer in
Chicago. Yesterday, we heard from professionals in the energy business. We asked
them about the obstacles they face -- why they're having trouble keeping up with
demand. In almost every instance, the story was the same: government regulation.
In some cases it's state and local laws that create the problem. In many cases,
its Federal regulations. We talked to a home heating oil distributor from New
England. He told us first of all that prices are so high that distributors can't
fill their storage tanks to get ready for the winter. They're going into the
winter with empty tanks. But he also told us one of the strangest stories of red
tape run amock that I've ever heard -- and I've heard a few. He brought with him
four little bottles of diesel fuel -- they're all different colors. I asked him
to leave the bottles with me so I could put them on display. Here they are. The
Federal government makes the dealer dye these fuels different colors and store
them in different tanks. The two red ones are compliments of the Treasury
Department. They're apparently for off-road use. The Treasury Department makes
the dealers dye them different shades of red to make sure that noone cheats on
their taxes. The two clear ones are compliments of the EPA. The EPA makes the
dealers store them separately because they have slight differences in their
sulfur levels. Dealers have a dwindling number of storage tanks
because it isn't economical to build them anymore. At the same time, they have
to subdivide the tanks they do have to hold these four different colored fuels.
They have to have different trucks to haul the different colors. And the kicker
is this -- they're all practically the same fuel -- the differences are very
small. I probably didn't explain that very well. I've had it explained to me
three or four times, and I'm still not sure I get it. I do know this much, it's
one of the more bizarre stories of government run amok that I've heard. At a
time that they're facing a market that's been turned on its head, they shouldn't
have to deal with this kind of nonsense. That's a fairly small problem. The
problems that the gasoline industry is facing are much more
serious. Under the Clean Air Act and other Federal regulations, it's impossible
to build a new refinery in this country. It hasn't been done in 25 years. In
1982, there were 231 refineries in the United States. Today, there are 155. Yet
at the same time, refiners have to make as many as 15 different blends of
gasoline in the summertime to comply with the reformulated
gasoline rules. So on the one hand, they can't expand their
capacity to keep up with demand, and on the other hand, the Federal government
is placing all of these additional demands for specialty fuels on them. (CHART)
We have a chart here of all the different fuels Citgo has to make in one region.
You can see the different colors. Their refineries are being stretched to the
limit. Under those circumstances, all it takes is one little disruption to bring
the whole system down. What happened in Chicago and Milwaukee this summer is
going to happen again and again unless we make some changes. But that's not all.
We were told yesterday that the EPA has a raft of new regulations for
gasoline and diesel fuels in the works. They're going to take
effect in the next few years. Chartj We have a chart showing the timeline.
Industry is telling them that if they're hit with these new restrictions in such
a short time period, it's going to overload the system. It's going to disrupt
fuel supplies. Consumers are going to be hurt. But apparently nobody's paying
any attention. When I say that we don't have a serious energy policy in this
country, this is exactly what I'm talking about. Industry has offered solutions
that would bring about dramatic reductions in sulfur and other
pollutants, but that wouldn't disrupt supply. The EPA isn't interested. That's
something I and other Members want to talk to both Mrs. Browner and Mr.
Richardson about today. Yesterday, we heard from an executive who builds
electric power plants. His company is building a state-of-the-art facility in
California. It sailed through the permit process. But under EPA rules, all it
takes is one person to file an appeal, and the whole process is brought to a
screaming halt. One person who lived I 00 miles away from this particular site
filed an appeal, and the project was shut down for more than four months. By the
time the appeal was dismissed, prime construction season was over and the rainy
season had started. The state of California is desperate for new generating
capacity. They're now pressuring the company to work double shifts to get the
plant on-line by next summer to try to avoid black- outs. Ironically, the EPA
has been working on new rules to streamline the appeals process and weed out
frivolous appeals since 1992. The new rules still haven't taken effect. These
are just a few examples of areas where the government can exercise a little
common sense to help solve some of these problems. But it isn't happening.
Nobody's saying we should repeal the Clean Air Act. Nobody's saying we should
roll back the clock. How about just a little more flexibility as we move
forward? These problems aren't going to go away by themselves. The Energy
Information Administration projects that natural gas prices will go up another
23% over current prices. They estimate that home heating oil will go up another
3 1 % this winter. When families are seeing their electricity bills tripling,
and when businesses are laying people off because they can't pay their energy
bills, something has to be done. If we don't develop a tough energy policy and
stick to it, we're just going to keep lurching from one crisis to the next. The
bottom line is this -- we can't bury our heads in the sand anymore. We have to
have a strong energy policy. Under this Administration, we haven't had a strong
energy policy. We've suffered from eight years of neglect. We need a policy that
will help us become more self-sufficient. We have enormous deposits of oil and
gas that are off-limits. We need to take another look at that. We need to review
some of these new EPA rules coming down the pike to see if some flexibility
isn't in order. Secretary Richardson, Administrator Browner, Mr. Hoecker
(Hecker), thank you for being here. We appreciate your time. We have a lot of
questions about all of these issues. I look forward to hearing your answers. I
understand that Secretary Richardson needs to leave by about two o'clock for an
important meeting. We'll try to get as much of our business done by then as
possible. We're going to limit opening statements so we can get to questioning.
I hope that our other two witnesses will be able to stay with us if necessary. I
now yield to Mr. Waxman for his opening statement.
LOAD-DATE: September 27, 2000, Wednesday
