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The New York Times: Bush Urges Congress to Help US Refineries Expand: Tuesday 27 September 2005

Published: September 27, 2005
Filed at 1:41 a.m. ET

WASHINGTON (Reuters) - President George W. Bush on Monday urged Congress to clear away regulatory obstacles that prevent building new U.S. oil refineries, a move certain to trigger a new fight with environmental groups and Democrats.

Hurricane Rita's 120 mile per hour winds last weekend knocked out two Texas refineries for up to a month. That came on top of 5 percent of U.S. Gulf Coast refining capacity that remains offline from Hurricane Katrina in August.

``The storms have shown how fragile the balance is between supply and demand in America,'' Bush said. ``We need more refining capacity.''

No new U.S. refinery has been built since 1976. U.S. gasoline demand has grown to over 9 million barrels per day (bpd) but a maze of permitting requirements and landowner objections has blocked new projects.

Bush specifically cited as a roadblock the ``new source review'' rule administered by the Environmental Protection Agency as part of the Clean Air Act. It aims to protect public health and ensure that refinery expansions do not increase air pollution from substances linked to acid rain and smog.

``The issue of new source review, for example, is one that we've reviewed and said that, for the sake of ... wise and careful expansion of refining capacity, we ought to look at those rules and regulations,'' Bush told reporters after meeting with Energy Department officials about hurricane damage.

Environmental groups have opposed earlier moves by the Bush administration to change the EPA new source review rule.

``It's clear that the president and his allies in the House are using Katrina as cover for ramming through proposals to weaken the Clean Air Act,'' said Kevin Curtis, vice president of the National Environmental Trust.

Democrats are also skeptical. They say oil companies are disinclined to build new plants because tight capacity keeps profits healthy. However, expanding existing plants is a less costly way to gain extra gasoline production -- and could become even cheaper if the ``new source review'' rule is gutted.

``This rush to push through legislation of dubious virtue without any significant review is both unnecessary and unwise,'' said Rep. John Dingell, senior Democrat on the House Energy Committee.


Since Katrina blasted the Louisiana coast on August 29, Republican lawmakers have proposed a raft of legislation aimed at boosting refining capacity.

Joe Barton, chairman of the House Energy Committee, is expected to hold a bill-drafting session on Wednesday to add about 2 million bpd in refining capacity from both new plants and expansion projects. Another House bill, offered by John Shadegg of Arizona, would require the government to provide risk insurance to six new refineries.

In the Senate, Jon Kyl of Arizona is pursuing tax breaks to encourage new or expanded U.S. refineries.

And EPA officials are drafting legislation that would give the agency broad power to suspend the Clean Air Act -- including the new source review rule -- to respond to natural disasters, according to Democratic Rep. Henry Waxman.

Bush said he supports such efforts.

``I look forward to working with Congress, as we analyze the energy situation, to expedite the capacity of our refiners to expand and/or build new refineries,'' he said.

Building a new refinery would take up to 10 years and $3 billion under existing rules, according to the National Petrochemical and Refiners Association.

``New, grass-roots refineries are not necessarily the best answer for the industry,'' Exxon Mobil Chairman Lee Raymond told CNBC television. ``What we really need is a streamlining of the regulations.'' He did not elaborate.

Barton's bill would require the EPA to change pollution rules to give refiners ``maximum legal flexibility'' available under existing law to expand and retool their plants.

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