Environmental compliance is pushing gas prices up, oil officials say

WASHINGTON (May 14) -- Refineries´ costs of complying with environmental laws are driving gasoline prices higher and supplies lower, oil industry officials said during a Senate committee hearing.

Gasoline is currently selling for more than $2 per gallon in many parts of the country.

Several Republicans on the committee expressed support for the industry´s position, but Democrats and an independent on the committee, as well as the American Lung Association, dismissed the arguments and said the oil industry was reporting high profits.

The number of domestic refineries has dropped significantly, from 324 in 1981 to only 149 today, Bob Slaughter, president of the National Petrochemical and Refiners Association, told members of the Senate Environment Committee. No new refineries have been built in the United States since 1976. The association partly blames the costs of meeting environmental requirements associated with building new refineries or expanding production at existing refineries.

The group also says that producing reformulated gasoline required in regions of the country with high ozone levels is driving up costs. Problems with supplying the reformulated gasoline were compounded when California, Connecticut and New York banned the use of the gasoline additive MTBE effective Jan. 1. The ban has increased demand for ethanol-blended fuel, creating shortages and driving up costs, Slaughter said.

Federal policymakers have often neglected the impact of environmental regulations on fuel supply, Slaughter said in written testimony. "This attitude must end," he said. "A healthy and growing U.S. economy requires a steady, secure, and predictable supply of petroleum products."

Sen. James Jeffords, I-Vt., the minority committee leader, said he was concerned about the impact of higher gasoline prices on the public, but he argued against overreacting.

"I´m concerned that the other harm to our constituents of these high prices may be in the form of premature calls to repeal or revise our federal environmental laws," Jeffords said.