Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

S. William Becker

Executive Director, STAPPA/ALAPCO

 Testimony of

S. William Becker

Executive Director

of the

State and Territorial Air Pollution Program Administrators

and the

Association of Local Air Pollution Control Officials

on

H.R. 5254, the Refinery Permit Process Schedule Act.

before the

Senate Committee on Energy and Natural Resources

 

July 13, 2006

 

Good morning, Mr. Chairman and members of the Committee.  I am Bill Becker, Executive Director of STAPPA – the State and Territorial Air Pollution Program Administrators – and ALAPCO – the Association of Local Air Pollution Control Officials – the two national associations of clean air agencies in 54 states and territories and over 165 major metropolitan areas across the United States.  Our associations’ members are responsible for achieving and sustaining clean, healthful air throughout the country and hold primary responsibility under the Clean Air Act for implementing our nation’s air pollution control laws and regulations.

 

STAPPA and ALAPCO commend you for convening this hearing to examine H.R. 5254, the “Refinery Permit Process Schedule Act,” recently passed by the House of Representatives.   We are pleased you are having this hearing since this marks the first time that Congress will hear stakeholders’ views on this bill, especially from state and local governmental agencies responsible for issuing permits to refineries. As you know, the House passed this bill without holding public hearings on this issue.

 

While our associations understand the Congress’ desire to take swift action of some kind to address high fuel prices, we strongly believe environmental permitting requirements have been wrongly targeted. Not only is new legislation not needed for expediting the permitting of refineries, we are concerned that H.R. 5254 could have the opposite result, and delay the issuance of permits, as well as present other serious consequences. Accordingly, we oppose its passage.

 

Before addressing our specific problems with H.R. 5254, we wish to make two observations.

 

First, we must challenge the premise of this bill, namely that state or local permitting requirements are preventing new refineries from being built or existing refineries from expanding.  We believe the facts prove otherwise.

 

According to the results of a recent survey (June 1, 2006) of state and local air pollution control agencies conducted by Congressman John Dingell, Ranking Member of the House Energy and Commerce Committee, “the environmental permitting process is not preventing new refineries from being built or existing refineries from being expanded.” Based upon responses from 20 states, representing 77 refineries – or about half of those in the United States – the survey summary revealed that:

            None of the State and local agencies…had received a major air permit application for a new refinery in the last 10 years. This is consistent with previous information from EPA. EPA previously said that they were aware of only one proposed refinery seeking an air permit in the last 25 years. According to information from the Arizona Department of Environmental Quality, two air permits have been issued for this proposed facility. The State issued the initial air permit in 1992, but the applicant let it lapse when financing could not be obtained. The State issued a new air permit in April 2005, nine months after a complete application was filed for the refinery at a new location in Yuma, Arizona.

 

 

With respect to existing refineries, 12 of the 20 states reported receiving requests for approximately 35 major New Source Review permits for expansions to their refineries in the past 10 years.  Once the agencies received complete applications, “all but two of the major permit actions for refinery expansions were completed within one year…and half were completed within seven months.” This is also consistent with previous EPA testimony (House Government Reform hearings, September, 2000) that half of major permit modifications for refineries were issued within five months and most others within a year.

 

The Environmental Council of the States has reached similar conclusions. In a letter (May 9, 2006) to Chairman Barton of the House Energy and Commerce Committee, ECOS indicated it is “unaware of any credible report that concludes that the time States take to review environmental permits has been, or is, a significant impediment to the issuance of refinery permits. We do not believe such documentation exists” (May 9, 2006).

 

Even the refinery industry has testified that environmental regulations are not interfering with the construction of new or the expansion of existing refineries. In Senate testimony before the Congress (November, 2005), the Chief Executive Officer of Shell stated, "We are not aware of any environmental regulations that have prevented us from expanding refinery capacity or siting a new refinery."  In addition, Conoco's CEO testified, "At this time, we are not aware of any projects that have been directly prevented as a result of any specific Federal or State regulation."  Finally, BP’s CEO concluded “it does not believe that any Federal or state environmental regulations have ‘prevented us’ from expanding refinery capacity or siting a new refinery.”

 

We believe the reason that new refineries are not being built in this country is because of economic considerations, not environmental permitting processes. In fact, the industry’s preferred choice to increase refinery capacity is to expand existing refineries, and as noted above, state and local agencies are issuing these permits in a matter of months, not years.

 

The second observation is that Congress, just ten months ago, took steps to address this issue.  Subtitle H of Title III (Refinery Revitalization) of the Energy Policy Act authorizes the EPA Administrator, at the request of a Governor, to enter into a refinery permitting cooperative agreement with the state.  Each party would be responsible for identifying steps, including timelines, which it will take to streamline the consideration of Federal and state environmental permits for a new refinery. The new law allows the Administrator to 1) accept from a refiner “a consolidated application for all [EPA] permits,” 2) enter into agreements with other federal agencies to consolidate refinery permits, and 3) enter into an agreement with a state under which federal and state review of refinery permit applications will be coordinated and concurrently considered. According to Energy Secretary Bodman, (World Energy, Volume 8, No.3) this new Title of EPAct “eases the constraints that have strangled new refinery construction.”  Yet, rather than allow this Subtitle the chance to work, H.R. 5254 repeals most of its provisions.

Now I will turn to H.R. 5254.

Section 4 of the bill appoints a “Federal coordinator” for refiner permitting. This person is responsible for convening a meeting of all federal and state agencies responsible for a refinery permit and establishing a schedule for reviewing and taking final action on the refiner’s permit application, whether it is for a new refinery or a modification to an existing one. The bill also requires the Federal coordinator to maintain a complete consolidated record of all decisions made with respect to the refinery.  The bill provides the federal district court in which the proposed refinery is located “exclusive jurisdiction” over any civil action resulting from failure to meet a deadline within the prescribed schedule.

STAPPA and ALAPCO have several concerns with this section of the bill. 

First, we are deeply troubled by the bill’s new layer of permitting bureaucracy and believe it could undermine the state and local permitting process and delay our review and approval of refinery permits, perhaps by many months. For example, Section 4 requires the President to appoint a Federal coordinator who is allowed to take up to three months just to negotiate a schedule for issuing the permit.  And because the schedule is judicially enforceable, state and local agencies will need to devote many more staff and involve several other offices (e.g., attorney general) in developing an appropriate timeline, which will cause additional and substantial delay to the issuance of permits.   Furthermore, if a party misses one of the judicially enforceable milestones in the agreement, rather than working the issue out cooperatively – as is typically done at the state or local level – the bill encourages a “cause of action” to be filed before the U.S. District Court, leading to a new court-ordered schedule. This will undoubtedly create an adversarial environment and lead to more delay and uncertainty.  All of these procedural requirements will take away valuable time that refinery and agency staff – managers, professional and legal – could otherwise be spending on the substantive issues of the refinery permit.

Second, we and other state and local organizations are very concerned with the preemptive elements of this bill. Last fall, for example, six groups – the National Conference of State Legislatures, the National Association of Counties, the National League of Cities, the U.S. Conference of Mayors, the Council of State Governments, and the International City/County Management Association – wrote the House Energy and Commerce Committee asking that “any proposed energy legislation exclude provisions that would preempt state and local governments’ permitting processes for energy facilities and related infrastructure, including refineries.” 

Unfortunately, H.R. 5254 preempts state and local governments in at least two areas.  First, as described above, the bill provides the Federal district courts, rather than the more appropriate state and local courts, with “exclusive jurisdiction” over civil actions for failure to meet a schedule.   In addition, the bill preempts state and local governments by establishing that memoranda of agreements setting forth the coordinated schedule be “consistent with the full substantive and procedural review required by Federal law,” irrespective of state or local procedures. If, for example, an existing state or local law or regulation provides for a slightly longer public comment period than the Federal coordinator deems appropriate (e.g., 60 days vs. 30 days), the state or local requirement would be preempted. 

We are also concerned with Section 5 of H.R. 5254, which authorizes the President to designate at least three closed military bases as potential sites for constructing a refinery, and requires the local redevelopment authorities to consider the feasibility and practicability of siting a refinery on the installation.  At issue is the extent to which this bill allows the federal government – in this case the Secretary of Defense – to force communities to accept construction of a refinery when the community objects. We support the statement of the Association of Defense Communities (May 25, 2006) that H.R. 5254 “does not give deference to the community’s choice. H.R. 5254 makes no distinction between communities that would like an oil refinery and those that don’t. The decision to place an oil refinery must be determined by the community, not the federal government.”

          In conclusion, STAPPA and ALAPCO believe that environmental permitting requirements have been wrongly blamed for preventing new refineries from being built or existing refineries from expanding. Congress just recently enacted provisions under EPAct to help expedite the permitting of refineries and should give the new law a chance to work. Our associations oppose the passage of H.R. 5254 because it is not necessary, will delay the issuance of refinery permits, preempts state and local authorities, and forces new refineries in communities that may not want them.

            Thank you for this opportunity to testify and I will be happy to answer your questions.