Draft House boutique fuels bill needs to address bio-fuels: API

Draft House boutique fuels bill needs to address bio-fuels: API

Washington (Platts)--7Jun2006

While a draft boutique fuels bill being reviewed Wednesday by the US
House Energy and Commerce Committee contains a number of positive provisions
that should help to increase fuel supply reliability, it needs to go further
in addressing bio-fuels, an American Petroleum Institute official told the
panel.

"The bigger challenge now facing us is the recent proliferation of
bio-fuel boutiques that are just as disruptive to supply but lack a basis in
improving air quality," API's downstream director Edward Murphy said,
according to a prepared copy of his testimony. "We feel strongly that the
addition of provisions restricting state bio-fuel mandates would substantially
strengthen what has been proposed. Additional state bio-fuel mandates could
undo or offset the benefits your legislation and the benefits [last year's
Energy Policy Act] promise to provide."

Murphy noted that bio-fuel mandates are increasing despite the federal
renewable fuels standard, requiring that 7.5 billion gallons of renewable
fuels be blended into motor gasoline by 2012.

"[I]ndividual states should not be permitted to force the use of ethanol
or biodiesel by devising and mandating their own gasoline/ethanol and/or
diesel/biodiesel blends -- particularly since they will jeopardize fungibility
and, thus, energy security," Murphy said.

He urged the panel to extend restriction on state-mandated fuels to
renewables or bio-fuels. "Given the existence of the federal RFS mandating the
use of a minimum volume of biofuels each year, and a trading program intended
to provide flexibility in where the biofuels are used, all state biofuel
mandates should be federally preempted," Murphy said.

The draft Boutique Fuel Reduction Act of 2006, being discussed at the
hearing, would require that the US Environmental Protection Agency set up an
"Approvable State Fuels List" with just three gasoline blends. The gasoline
blends must have different Reed Vapor Pressure controls, and one of the three
must have an RVP of 7.0 psi.

Murphy said he liked that the legislation would grandfather and "wall in"
the Texas low emission diesel program and the Phoenix, Arizona, and Clark
County, Nevada clean-burning gasoline programs, preventing adoption in other
states. He also praised the provision that would, as an interim step, set a
specific cap on the number of fuels that could be used in any one PADD, or
fuel-using region, and eventually reduce the number of available fuels per
PADD once air quality improvements are attained.

Murphy said API also supported a provision that prevents EPA from
including in the state fuel list any fuel that controls for sulfur and toxic
parameters beyond federally required levels and one that limits growth in the
state highway diesel programs to avoid a parallel boutique problem for diesel
fuel.

--Cathy Landry, cathy_landry@platts.com

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