Dissenting ViewsEnergy Policy Act of 2005Title III, Oil and Gas Provisions
Section 320 - Liquefaction or Gasification Natural Gas Terminals The language in section 320 was not in last year’s House bill nor was it included in the conference report to H.R. 6 in the 108th Congress. This language made its debut in the Committee print on March 31, 2005. It has not been the subject of a hearing. Section 320 contains broad changes to the Natural Gas Act affecting both the Federal Energy Regulatory Commission (FERC) and the role of the states in Liquefied Natural Gas (LNG) issues. This section, among other things, modifies Section 3 of the Natural Gas Act to give FERC exclusive jurisdiction over the construction, expansion, or operation of LNG facilities; establishes an unreasonable delay/backstop standard that presumes approval by Federal and state agencies if they do not comply with FERC time lines; and defines unreasonable delay as one year after an application has been filed. The bill establishes the FERC record as the exclusive record for administrative proceedings, and makes the D.C. Circuit Court of Appeals the exclusive court for civil appeals of this section. Proponents of this provision argue that it allows a greater role for States by requiring FERC to consult with them prior to granting an order under the new section and by allowing States to inspect LNG facilities. It must be noted, however, that consultation is a loose standard that does not guarantee collaboration or cooperation. As for a State’s ability to conduct safety inspections, the bill requires the State to submit notification in writing to FERC, which raises the question of whether FERC has the ability to deny permission to inspect. The bill further requires that inspections by State officials “be carried out in conformance with Federal regulations and guidelines” which is undefined in the bill. The siting, construction, and expansion of LNG facilities is an issue of growing national importance, as well as controversy. The Committee would be well served by conducting extensive hearings so that all views may be expressed and examined before such sweeping legislative changes are made. Democrats, led by Representative Ed Markey (D-MA), offered an amendment to strike this section from the bill. The amendment was defeated by a vote of 18-35. Subtitle D - Refining Revitalization Subtitle D contains language that is similar, but not identical, to a bill from the 108th Congress. The subtitle authorizes the Secretary of Energy to designate “refinery revitalization zones,” which are areas that have experienced mass layoffs or contain an idle refinery and have an unemployment rate that exceeds the national average by 10 percent. The language establishes the Department of Energy (DOE) as the lead agency for an expedited permitting process that is defined as six months during which all Federal permit decisions and environmental reviews are to be completed. It directs that DOE maintain the exclusive record for all administrative proceedings, and establishes an appeals process for refinery applicants or States that allow an appeal to the Secretary of Energy, who may override the concerns of other Federal and State agencies and grant approval of a permit that had been denied. Proponents of this provision argue that there are large numbers of closed or idle refineries seeking to reopen and that both these facilities and new refineries are having difficulties obtaining environmental permits. Following the July 2004 hearing, Ranking Member Dingell sent a letter to EPA Administrator Leavitt along with a list of over 200 closed refineries. He asked the Administrator how many of these refineries had permit applications pending that would re-open or re-start these refineries. Three months later EPA provided the following response:
A previous response indicated there were no permits pending under the Clean Air Act either. Proponents of this provision have also cited attempts by a facility in Yuma, Arizona, to receive a permit over the last ten years. Democratic committee staff obtained a chronology from the State of Arizona that revealed an initial permit was granted to the applicant in 1992 for a facility in Maricopa County, but the company chose not to construct for seven years. After several incomplete permit applications were submitted between 1999-2003, the facility announced in 2003 that it had decided to move to Yuma, Arizona. A complete permit application was submitted in July of 2004. That permit has now been granted, in less than a year. Since the bill defines the term “Federal Authorization” as “any authorization required under federal law”, it will allow the Secretary of Energy on appeal to override the decisions not only of the EPA Administrator and state officials under the federal environmental laws but also the Secretary of Defense and Secretary of Interior in the following circumstances:
This subtitle cites the year 1981 as the high-water mark for the number of refineries in the United States. In 1981, President Reagan ordered the elimination of the refinery allocation programs that favored small refiners, thus leading to several closures. Refinery companies themselves have mothballed refineries. A recent Government Accountability Office (GAO) report entitled “Energy Markets: Effects of Mergers and Market Concentration in U.S. Petroleum Industry” offers the following:
This highly concentrated market has resulted in higher prices. According to GAO:
In addition, the Congressional Research Service has found that while a number of refineries have closed, the capacity of the industry has increased:
According to the Energy Information Administration (EIA) Annual Energy Outlook 2005 report released this past February:
EIA’s analysis also confirms that refining capacity will increase in all their projections and that refining costs are expected to “remain stable or decline.” EIA also notes that the price of “crude oil continues as the largest part of product prices.” Because of the obvious discrepancy between the facts and the claims of this provision’s proponents, Democrats, led by Rep. Hilda Solis (D-CA), offered a motion to strike this provision from the bill. The amendment was defeated by a vote of 22-27. Section 327 - Hydraulic Fracturing and Safe Drinking Water Hydraulic fracturing is a technique used to enhance the recovery of methane gas from coal beds. The Environmental Protection Agency (EPA) defines hydraulic fracturing as a “temporary and intermittent process in which fluids are injected underground at high pressures to create fractures in the coals seam that enhance the recovery of methane gas by creating pathways for the gas to flow to the surface.” The EPA conducted a narrowly focused study to address hydraulic fracturing of coalbed methane wells, but not all hydraulic fracturing practices. The final report released in June of 2004 did not find confirmed evidence that drinking water wells have been contaminated by hydraulic fracturing fluid injection into coal bed methane wells. The EPA Final Report, however, has become a source of controversy with its scope, objectivity, and conclusions challenged by a senior EPA engineer from Region 8. On March 11, 2005, the EPA Inspector General announced that she would review the concerns being raised with the Final Report. Section 327 of the bill eliminates existing statutory authority under SDWA to ensure that hydraulic fracturing does not endanger underground sources of drinking water by removing hydraulic fracturing for oil and gas production activities from the term “underground injection” in Section 1421. This is very significant because virtually all people living in rural areas and more than 50 percent of all Americans rely on groundwater for their drinking water. The majority provision in Section 327 eliminates all EPA authority under the Safe Drinking Water Act to protect sources of drinking water from improper or harmful hydraulic fracturing practices now or in the future. It does not allow for a regulatory determination by the EPA based on the completed study and review by the National Academy of Sciences. Further, the majority action is taken without the benefit of any hearings on this matter by the Subcommittee on Environment and Hazardous Materials which has jurisdiction over Safe Drinking Water Act matters. The EPA’s initial findings indicated that the use of diesel fuel in fracturing fluids by some companies introduced the majority of constituents of concern to underground sources of drinking water. The EPA also stated that water-based alternatives exist and from an environmental perspective are preferable to the injection of diesel fuel in underground sources of drinking water. In the Final Report, EPA determined that, in some cases, constituents of potential concern are injected directly into underground sources of drinking water during the course of normal fracturing operations. The use of diesel fuel in fracturing fluids introduces benzene, toluene, ethly benzene, and xylenes into underground sources of drinking water. Given the concerns associated with the use of diesel fuel and the introduction of these contaminants into underground sources of drinking water, EPA entered into a Memorandum of Agreement with three major service companies to voluntarily eliminate diesel fuel from hydraulic fracturing fluids that are injected directly into underground drinking water sources for coalbed methane production. Under this bill, however, EPA would have no residual authority to enforce this agreement under the Safe Drinking Water Act. Some have argued that the emergency powers authority of Section 1431 of the SDWA remains available. The emergency powers of Section 1431 do not, however, provide the necessary regulatory authority. The emergency power authority only applies on a case-by-case basis and requires an imminent and substantial endangerment to a person’s “health.” Section 1431 does not apply to protecting the environment such as underground aquifers that are sources of underground drinking water. Representative Diana DeGette (D-CO) offered an amendment to section 327. In summary, the DeGette amendment provided for:
This approach is based on a bipartisan staff agreement that was circulated for inclusion in the conference report in the 107th Congress. We believe this approach – preserving authority under the Safe Drinking Water Act to protect underground sources of drinking water but addressing industry fears of lawsuits that force regulation – is a far sounder public policy than the one set forth in Section 327 of the bill. Rep. DeGette’s amendment was defeated by a vote of 16 to 30. Representative Hilda Solis (D-CA) offered an amendment to ban the injection of diesel fuel into an underground source of drinking water. This amendment was defeated by a vote of 14 - 27. Other Provisions Representative Jim Davis (D-FL) offered an amendment to Section 330 that strikes the section that redefines the states’ role in the appeals process for consistency under the Coastal Zone Management Act. The bill limits the Secretary of Commerce's review to the records of FERC only, impairing the state's ability to present their views. The amendment was defeated by a vote of 19 - 29. Representative Bart Stupak (D-MI) also offered an amendment to prohibit any Federal or state permit or lease for new oil and gas slant, directional or offshore drilling in or under the Great Lakes. That amendment was adopted after Representative Mike Rogers (R-MI) weakened it with a substitute amendment that merely encourages States to ban drilling. The substitute mirrored language already in the bill. JOHN D. DINGELL |
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