[Congressional Record Volume 147, Number 98 (Monday, July 16, 2001)]
[Extensions of Remarks]
[Pages E1336-E1337]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




SMALL BUSINESS REFINERS COMPLIANCE WITH THE HIGHWAY DIESEL FUEL SULFUR 
                          CONTROL REQUIREMENTS

                                 ______
                                 

                           HON. STEPHEN HORN

                             of california

                    in the house of representatives

                         Monday, July 16, 2001

  Mr. HORN. Mr. Speaker, at the beginning of this year, on January 18, 
2001, the Environmental Protection Agency (EPA) implemented heavy-duty 
engine and vehicle standards and highway diesel fuel sulfur control 
requirements. I strongly supported the final rule by the EPA as a 
necessary tool to reduce pollution. Under this new regulation, oil 
refiners must meet rigorous new standards to reduce the sulfur content 
of highway diesel fuel from its current level of 500 parts per million 
to 15 parts per million by June, 2006. The diesel rule goes a long way 
in reducing the amount of pollution in our air.

[[Page E1337]]

  Small business refineries produce a full slate of petroleum products 
including everything from gasoline, diesel, and jet fuel to asphalt, 
lube oil, and specialty petroleum products. Today, among the 124 
refineries operating in the United States, approximately 25 percent are 
small, independent refiners. These small business refiners contribute 
to the nation's energy supply by manufacturing specific products like 
grade 80-aviation fuel, JP-4 jet fuel, and off-road diesel fuel.
  In order for oil refineries to comply with the new rule, the EPA 
estimated capital costs at an average of $14 million per refinery. This 
is a relatively small cost for major multinational oil companies, but 
for smaller refineries, this is a very high capital cost that is 
virtually impossible to undertake without substantial assistance. Small 
business refiners presented information in support of this position to 
EPA during the rulemaking process. In fact, EPA agreed that small 
business refiners would likely experience a significant and 
disproportionate financial hardship in reaching the objectives of the 
diesel fuel sulfur rule.
  There is currently no provision that helps small business refiners 
meet the objectives of the rule. That is why I am introducing a tax 
incentive proposal that would provide the specific, targeted assistance 
that small refineries need to achieve better air quality and provide 
complete compliance with EPA's rule.
  A qualified small business refiner--defined as refiners with fewer 
than 1,500 employees and less than a total capacity of 155,000 barrels 
per day--will be eligible to receive federal assistance of up to 35 
percent of the costs necessary, through tax credits, to comply with the 
Highway Diesel Fuel Sulfur Control Requirements of the EPA.
  Without such a provision, many small business refiners will be unable 
to comply with the EPA rule and could be forced out of the market. 
Individually, each small refiner represents a small share of the 
national petroleum marketplace. Cumulatively, however, the impact is 
substantial. Small business refiners produce about four percent of the 
nation's diesel fuel and in some regions, provide over half of the 
diesel fuel. Small business refiners also fill a critical national 
security function. For example, in 1998 and 1999, small business 
refiners provided almost 20 percent of the jet fuel used by U.S. 
military bases. Small business refiners' pricing competition pressures 
the larger, integrated companies to lower prices for the consuming 
public. Without that competitive pressure, consumers will certainly pay 
higher prices for the same products.
  Over the past decade, approximately 25 U.S. refineries have shut 
down. Without assistance in complying with the EPA rule, we may loose 
another 25 percent of U.S. refineries.
  This legislation is critical--not because small business refiners do 
not want to comply with the EPA rule due to differences in 
environmental policy--but because it will help keep small business 
refiners as an integral part of the industry and on their way to 
cleaner production and full compliance with all environmental 
regulations.

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