The U.S. Environmental Protection Agency has taken richly deserved beatings on Capitol Hill recently over two proposals concerning reformulated gasoline. One proposal is EPA's effort to require that 30% of the oxygenates mandated for reformulated gasoline come from renewable sources ethanol, in other words. The other clinker is a generous regulatory interpretation for gasoline imported from Venezuela.
The ethanol mandate helps no one but ethanol producers and, by association, grain farmers. It provides no net environmental gain and in some areas will aggravate pollution. It is recklessly expensive, given the lavish subsidies on which ethanol depends. And it probably exceeds EPA's authority. Those arguments have persuaded a majority of senators and a growing number of representatives to balk.
POLITICAL ANGLE
The political angle in EPA's Venezuelan caper is a separate issue: expansion of the General Agreement on Tariffs and Trade (GATT), approved internationally late last year and awaiting ratification in the U.S. The Clinton administration has staked much on ratification and no doubt winced when Venezuela made U.S. gasoline standards a GATT complaint. EPA's compromise allows Petroleos de Venezuela SA (Pdvsa) to sell gasoline in the U.S. that, U.S. refiners say, won't meet average specifications applicable to domestically produced fuel.
Like EPA's ethanol gambit, the Venezuelan compromise stirred a proper congressional ruckus over specific issues. But the moves raise broad questions that need attention as well.
One of those questions is whether business can trust government. The regulations on reformulated gasoline emerged from a long series of negotiations involving refiners, environmentalists, other interest groups, and EPA officials. However rocky, the process was a model of consensus building. Yet as soon as it suited political purposes, officials trashed the agreement. Former President George Bush started the shenanigans by offering an ethanol volatility waiver when he needed farm state votes in his bid for reelection. President Clinton now apparently feels obliged to reward those states for supporting him instead. The message: Government agreements don't stand up to political pressures.
For refiners, EPA's deal with Pdvsa only compounds the mistrust. They made a deal with government on reformulated gasoline, only to see the administration make what looks to them like a more lenient agreement with a foreign competitor appealing to a separate political priority. Well, politics is politics. But business is business, and the refining business has suffered too much at the hands of politicians lately.
WHERE'S DOE?
Another broad question, then: Where has the Department of Energy been in all this? A viable refining industry, with capacity sufficient to produce all fuels the nation might need in an emergency, is central to national energy interests. Political adulteration of reformulated fuel regulations thus seems like a good chance for DOE to exert advocacy on behalf of a vital part of its responsibilities. Yet under hard questioning in Congress, John Riggs, DOE assistant secretary for policy, had to admit that the department hadn't looked very closely at the market consequences of the ethanol mandate.
The executive branch of government needs a wake up call, and Congress, to its credit, has begun to deliver it. Gasoline reformulation involves crucial environmental, consumer, economic, and security interests. To play political games with it now amounts to nothing less than treachery.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
