WASHINGTON, DC – Sen. James Inhofe (R-Okla.), Chairman of the Environment & Public Works Committee, held a full Committee hearing today to examine the environmental framework affecting oil refining and gasoline policy and prices. Gasoline prices are nearing three dollars per gallon in some parts of the country and oil refineries in the United States are operating around-the-clock – some at nearly 98% of capacity. Many factors contribute to high gas prices – 50% attributed to the price of imported crude oil. Today’s hearing heard testimony from industry experts on the role that environmental regulations affect fuel supply, pricing, and the constraints on building new refineries.


“In the past decades, our laws and regulations have improved the environment and no one is saying that the great strides we have made should be rolled back, but it is critical that the American people realize that environmental regulations are not free – they have a very real price,” Senator Inhofe stated. “Unfortunately, instead of addressing the real problems facing the marketplace when gasoline prices rise, some members of Congress call for an FTC investigation for price fixing – even though no collusion is ever found. It is too bad those members of Congress never point out that many of the reasons for the high gasoline prices start right here in Congress with the laws that we pass, and with the Federal Agencies who implement the regulations.”


The market’s supply-demand balance is extremely tight. While demand for gasoline continues to grow, the number of U.S. refiners has dropped significantly. In 1981, there were 324 refineries; today we have only 149. The last time a new refinery was built in this country is 1976.


Inhofe cited a three-panel chart depicting a best case scenario to scope, site, and construct a new 250,000 barrel/day refinery. In a best case, assuming no opposition from special interest environmental groups, and without wrangling with Not-In-My-Backyard issues, it would take five to seven years at cost of $2.5 Billion. However, this best case scenario, as costly and time intensive as it is, is far from reality. A new project would face a maze of environmental-related permits from hazardous wastes to water to air emissions.


Bob Slaughter, President of the National Petrochemical and Refiners Association, stated, “U.S. refining capacity has increased slightly in recent years, but it has become increasingly difficult to keep pace with the growth in demand for petroleum products. It is now becoming harder to add capacity at existing sites due in part to more stringent environmental regulations. We hope that policymakers will recognize the importance of domestic refining capacity expansions to success of the nation’s environmental policies, and help inform the public of the need for these facility improvements. New Source Review reform will also provide an important tool to help add new U.S. refining capacity.”


Even Dr. Mark Cooper, Director of Research - Consumer Federation of American, when questioned about New Source Review reform measures conceded that any uncertainty in the market place raises prices for consumers.