Speeches/Testimony

Statement of the National Petrochemical & Refiners Association to the Environment Committee of the General Assembly of the State of Connecticut Concerning S.B. 840, An Act Concerning MTBE As A Gasoline Additive
February 10, 2003

Senator Williams, Representative Widlitz and members of the Environment Committee. Good Morning.

I am Charles Drevna, Director of Technical Advocacy of the National Petrochemical & Refiners Association (NPRA). NPRA thanks you for the opportunity to appear before you today on the subject of motor fuels policy in the state of Connecticut. NPRA is a national trade association whose members comprise the owners or operators of nearly all U.S. refining capacity, as well as petrochemical manufacturers with processes similar to refiners.

NPRA supports the orderly development and use of cleaner-burning fuels to address health and environmental concerns while the flow of adequate gasoline supplies to the motoring public is maintained. However, this outcome can only be achieved if energy and environmental policymaking is integrated and if the costs and benefits of new regulatory or legislative requirements are carefully balanced and any adverse impact on energy supplies is both assessed and mitigated. For these reasons, NPRA supports S.B 840, an act related specifically to MTBE as a fuel additive and just as importantly to the overall gasoline supply and distribution system in Connecticut.

Current Status

Due to the Clean Air Act, Connecticut (along with New York City and other Northeast and Mid-Atlantic States) is required to use reformulated gasoline (RFG). Further, the CAA specifies that RFG contain an oxygen content of at least 2% by weight. The only viable commercial blending components available to meet that requirement are either MTBE or ethanol. Without the passage of S.B. 840, the Connecticut ban of MTBE will commence on October 1, 2003 and there will be no option in Connecticut. All RFG will require a blend with ethanol.

Consequences of Inaction

Several vital concerns must be addressed and fully understood before outright prohibition of any fuel additive or substitution of yet another should be required, much less accomplished. These include the need to:

Continue to protect the significant, real world air-quality gains made by RFG in Connecticut, and
Maintain an adequate fuel supply to prevent unreasonable market disruptions affecting Connecticut residents.

This is a tall order by anyone's assessment, especially when considering the short time frame available to make decisions that could very well impact the state for many years to come.

Failure to enact S.B. 840 will essentially transform the Connecticut gasoline market and infrastructure into an isolated island, with no access to the supply and distribution chain of regional or neighboring states. Without S.B. 840, Connecticut will be creating a non-fungible, single-state, ethanol-based RFG program with little or no margin for production and/or distribution error, given the lack of readily-available replacement fuel.

Recommendations

NPRA opposes an ethanol mandate and a ban on MTBE in motor fuels in keeping with our concerns about the impact of these policies on fuel supplies. Mandates are inefficient mechanisms that provide little or no benefit and that unnecessarily increase the cost of fuel manufacture. We vigorously support the elimination of the 2% oxygen content mandate for federal reformulated gasoline (RFG) in the Clean Air Act.

Some NPRA members who are also members of the American Petroleum Institute support the fuels package approved by the U.S. Senate last year which would impose an ethanol mandate on all U.S. gasoline, eliminate the 2% RFG oxygenation requirement and ban MTBE. The majority of our membership and NPRA as an association does not support this approach. A program that substitutes an ethanol mandate for the oxygen content requirement in RFG is flawed. We do not recommend substituting one fuel mandate for another. Ethanol already enjoys a large federal subsidy and a protective tariff, as well as several generous state subsidy programs.

If Connecticut consumers want to use ethanol, fine, but Congress should not force Connecticut consumers to pay for the privilege of not using ethanol, which is the upshot of the fuels language passed by the Senate. Simple elimination of the 2% oxygen requirement, absent mandates or bans, would address most, if not all, of the concerns about RFG usage in Connecticut and the Northeast.

These matters are being debated at the federal level, and will hopefully be resolved soon. In the meantime, we note the recent action taken by New York to seek a waiver from the 2% oxygen requirement. California had submitted a similar request and, although denied by EPA, the matter is now before the Courts. NPRA has filed in support of California's request for a waiver.

As fuel manufacturers and suppliers, we hope that as much of New England as possible can and will adopt consistent fuel specifications. We believe that the best approach to achieve this objective, maintain adequate fuel supplies and continued environmental progress is through repeal of the 2% oxygenation requirement with no ensuing mandate or ban.

When addressing fuels and environmental policy, state or federal officials must include these key considerations, among others:

Fuel supply,
Current fuel distribution patterns and the existing local fuel distribution infrastructure,
Opportunities to significantly increase flexibility to redistribute available fuel supplies if a problem should arise,
Potential impacts on small businesses (i.e., retail gasoline stations on or near a border where there are different gasoline requirements),
The impact of new 8-hour ozone NAAQS non-attainment areas and relevant attainment dates, and
Potential legislative changes to the Clean Air Act (i.e., elimination of the oxygen content requirement for RFG).

Summary

There is a close connection between federal transportation, energy, and environmental policies. Unfortunately, these policies are often debated and decided separately and thus in a vacuum-as part of an energy bill…an environmental bill…or a transportation bill. As a result, positive impacts for one policy area sometimes conflict with or even undermine goals and objectives in other areas. Whether by federal fiat or self-imposition, an ethanol mandate for Connecticut's gasoline supply may well affect documented air quality gains, inhibit fuel supply and distribution, and subject the driving public to unnecessary market uncertainties.

These conditions can be minimized, if not avoided, through concerted and cooperative efforts by states and regions, along with like-minded fuel producers, transporters, and marketers, working together to implement the needed changes in federal policies. NPRA stands ready to work with Connecticut and other states to ensure fuels policies that are environmentally sound, economically justifiable, and provide fuel supply stability.

Thank you for this opportunity to share NPRA's views with you on this important matter. I will be happy to answer any questions that you may have concerning any specifics or details of my testimony