API and NPRA urge Washington to look at remedies other than fuel price controls to address widespread concerns about cost.

While expressing sympathy for consumers and businesses that are angry about paying high fuel costs even as petroleum companies experience record profits, the industry is nevertheless arguing against calls for the federal government to levy price controls on fuel.

“We understand that the recent volatility in the energy market has sparked questions about energy pricing and profits,” Bob Slaughter, president of the National Petrochemical & Refiners Association (NPRA), told a joint hearing of the Senate Energy and Natural Resource Committee and Senate Commerce, Science and Transportation Committee. “We further believe that allegations of price gouging and other irregularities must be subject to careful and transparent analysis.”

But Slaughter cautioned that “events of the past two months must be kept in perspective.” Katrina and Rita, he reminded senators, temporarily knocked out 30 percent of U.S. refining capacity. Since then, he said, “U.S. average gasoline prices have returned to pre-Katrina levels.”

In addition, market forces actually have helped to keep supply and demand in balance, Slaughter said. “Enactment of politically tempting but marketplace-disrupting price controls is the absolute wrong cure for the situation,” he insisted to lawmakers.

Slaughter also pointed out that the U.S. refining industry has made “major capacity additions in the past decade despite low or absent returns on refining investment during this period.”

More expansion is planned. “Over the next several years, announced capacity increases will raise domestic capacity by more than one million barrels per day, with more expected,” he said.

Also submitting testimony, the American Petroleum Institute (API) seconded Slaughter's contention that the market is working. Instead of controls, it advocated easing restrictions on access to some petroleum resources and lifting barriers to refinery capacity expansion.

“We do have an abundance of competitive domestic oil and gas resources in the United States,” API said. “According to the latest published estimates, there are more than 131 billion barrels of oil and more than 1,000 trillion cubic feet [tcf] of natural gas remaining to be discovered in the U.S. However, 78 percent of this oil and 62 percent of this gas are expected to be found beneath federal lands and coastal waters.”

API noted that “significant volumes” of these resources are off-limits. “For instance, of the 209 tcf of estimated undiscovered natural gas in the Rockies, 69 tcf is completely off-limits, while another 56 tcf is seriously constrained by federal policy,” it said. “That is 125 tcf that is restricted - enough to heat 60 million homes for 30 years.”

Responding to environmental concerns, the institute argued that the industry has made strides in reducing the impacts of oil and gas development to local ecosystems. It also claimed that continuing to restrict access to resources in the Outer Continental Shelf and elsewhere raised national security concerns.

“For the United States to secure energy for our economy, government policies must create a level playing field for U.S. companies to ensure international supply competitiveness,” API said. “With the net effect of current U.S. policy serving to decrease U.S. oil and gas production and to increase our reliance on imports, this international competitiveness point is vital.”

API made several other recommendations to the Senate panels, including:
· Streamlining the permitting process for refineries, storage facilities and pipelines to avoid “regulatory bottlenecks.”
· Lifting barriers to capacity expansion. This includes reconsidering particulate and ozone attainment deadlines in major refining areas and codifying New Source Review reforms.
· Giving the federal government “absolute authority” to waive federal and state environmental and product-quality fuel requirements in emergencies.
· Reducing the number of state “boutique fuel” requirements. API complained that “there are many local fuel specifications that require special production and handling, causing inefficiencies in the distribution system and increased volatility when … interruptions occur.”
· Allowing states greater authority to opt out of moratoria and develop resources off their coasts. “This could help supply … critically needed [fuel],” it said.

“If we all do our part - industry providing supplies and repairs as expeditiously as possible, government facilitating needed approvals and consumers adjusting their energy use habits to consume less fuel - Americans can overcome this challenge as we have others in our nation's history,” API concluded.  E+P