[Senate Report 109-74]
[From the U.S. Government Publishing Office]
Calendar No. 116
109th Congress Report
SENATE
1st Session 109-74
======================================================================
RELIABLE FUELS ACT
_______
May 26, 2005.--Ordered to be printed
_______
Mr. Inhofe, from the Committee on Environment and Public Works,
submitted the following
R E P O R T
[to accompany S. 606]
together with
MINORITY AND ADDITIONAL VIEWS
[Including cost estimate of the Congressional Budget Office]
The Committee on Environment and Public Works, to which was
referred the bill (S. 606) to amend the Clean Air Act to
eliminate methyl tertiary butyl ether from the United States
fuel supply, to increase production and use of renewable fuel,
and to increase the Nation's energy independence, and for other
purposes, having considered the same, reports favorably thereon
with amendments and recommends that the bill, as amended, do
pass.
General Statement
In 1990, the Clean Air Act was amended to include the
reformulated gasoline, or RFG, program. The program was
designed to address persistent pollution from automobiles.
While tailpipe standards for automobiles are effective for new
vehicles, the RFG program added additional controls and was
able to address emissions from vehicles of all ages within the
current fleet. RFG program was required in metropolitan areas
that have the most serious air pollution levels. Although not
required to participate, some areas in the Northeast, in
Kentucky, Texas and Missouri have elected to join, or `opt-in,'
to the RFG program as a relatively cost-effective measure to
help combat their air pollution problems. Today, roughly 35
percent of this country's gasoline consumption is cleaner-
burning reformulated gasoline.
One element of the RFG program was the requirement that RFG
contain 2.0 percent minimum oxygen content by weight. This
provision was of assistance in the goal of making gasoline burn
cleaner, both in terms of criteria air pollutants and toxic air
emissions. The addition of oxygen to gasoline resulted in
greater supplies of fuel being available, given that the
principal oxygenate additives are not derived from crude
petroleum.
RFG blended with oxygenates has exceeded all pollution
reduction goals and substantially and cost-effectively improved
the nation's air quality. According to EPA, RFG has cut smog-
forming pollutant emissions by over 25 percent, the equivalent
of removing 94,000 tons of harmful pollution from the air we
breathe or taking 15 million vehicles off our roads. The
benzene content of RFG is some 60 percent lower than the
benzene content of gasoline in 1990. Total toxic air emissions
have been reduced about 27 percent from 1990 levels. Cleaner-
burning MTBE accounts for a large part of the overall emission
reductions from RFG.
The program set a variety of content and performance
requirements, including a minimum content requirement for
oxygen and maximum allowable benzene and heavy metal quantities
in RFG. Through regulatory authority provided by the Act, EPA
chose, in 1993, to adopt performance standards for toxic air
pollutants and volatile organic compounds (VOCs) rather than
the prescriptive fuels formula allowed under Section
211(k)(3)(A). These performance standards required a 15 percent
reduction in toxic air pollutants from baseline vehicles
starting in 1995 and maintained through 1999, and required a 22
percent reduction from baseline vehicles beginning in 2000, as
part of Phase II. Phase II also requires reductions in NOx and
VOCs.
Motor vehicle emissions of carbon monoxide, volatile
organic compounds, and, most notably, toxics have been reduced
drastically in RFG areas. Refiners have produced RFG that
exceeded the statutory requirements to reduce toxic emissions,
including emissions of benzene. Recent data suggest that
refiners have achieved a 27 percent or higher reduction in
toxic air pollutants in RFG (where MTBE was used) from the 1990
baseline. A 1998 study by the Northeast States for Coordinated
Air Use Management (NESCAUM) concluded that Phase II RFG would
reduce the public cancer risk by 20 percent.
On March 29, 2001, EPA issued it's Mobile Source Air Toxics
Rule (MSAT) to limit air toxics emissions from motor fuels, as
required by Section 202(l) of the Act. It is intended to ensure
that refiners continue over-compliance with RFG and anti-
dumping requirements by maintaining their average 1998-2000
toxic emissions performance levels for RFG and conventional
gasoline. The MSAT rule commits EPA to revisiting additional
fuel and vehicle MSATs controls in a 2005 rulemaking. The
deadline in the CAAA for issuance of these regulations was June
1995. EPA is actively developing a proposal for a new mobile
source air toxics rule. It is currently subject to a deadline
suit, and a specific schedule has not yet been determined.
The final MSATs rule was challenged by a number of parties.
On May 24, 2001, the States of New York and Connecticut and the
Sierra Club, Earth Justice, the Natural Resources Defense
Council and the U.S. Public Interest Research Group filed suit
against EPA, charging that the MSATs rule fails to achieve the
pollution reductions mandated by the Clean Air Act. Other
parties, including Hovensa LLC, and International Truck and
Engine Corporation have filed petitions in the United States
Court of Appeals challenging EPA's final rule on the grounds
that it is inconsistent with section 202(l) of the Act, that
EPA acted arbitrarily and capriciously in promulgating the rule
and did not adequately follow required notice and comment
rulemaking procedures. On April 25, 2003, the U.S. Court of
Appeals for the D.C. Circuit issued its decision. It denied on
the merits the claims of the environmental and State
petitioners, except for remanding to EPA on the issue of
explaining its decision not to require on-board diagnostic
equipment for new heavy-duty vehicles over 14,000 pounds.
There is no specific deadline in the Act for EPA to further
reduce toxic air pollutants from mobile sources. Section 204,
however, requires EPA to promulgate final regulations
addressing hazardous air pollutants from vehicles and fuels by
July 1, 2004, as per the MSAT rule. The Agency retains general
authority to control emissions from motor vehicles of any air
pollutant that causes or contributes to air pollution which may
reasonably be anticipated to endanger public health or welfare.
In a discussion focused on maintaining air toxics reductions
from the RFG program, EPA's Blue Ribbon Panel on Oxygenates in
Gasoline specifically recommended that EPA should explore and
implement mechanisms to achieve equivalent or improved public
results that focus on reducing those compounds that pose the
greatest risk.
The panel recognized that the current mass-based
performance requirements in the RFG program may not adequately
account for and consider that the different exhaust components
pose differential levels of risk to public health due in large
part to their variable potency.
While the RFG program is considered a general success,
experts acknowledge that there is some uncertainty in
estimating the actual quantity of mobile source emissions. It
is difficult to verify the emission reductions associated with
the RFG program as distinct from other mobile source emission
reduction programs. In May 2000, the National Research Council
recommended that EPA make a number of improvements to the
Mobile Source Emissions Factor model (MOBILE), including
estimation of off-road vehicle emissions and incorporation of
both mobile source toxic emissions and high-emitting vehicles.
More regular revisions and updating of this model is
important for air quality planners. S. 606 requires the EPA to
expedite resolution of the current complex model which
generates important fuels-related emissions information and
provides input for the MOBILE model so that vehicle
manufacturers, fuel makers, air quality planners, and Congress
have accurate information.
Oxygenates
The CAAA required that 2 percent by weight of RFG be
oxygen. This requirement was not included in the Senate
Environment and Public Works Committee's reported version of S.
1630, the Clean Air Act Amendments of 1989. It was added on the
Senate floor after vigorous debate and was the only successful
floor amendment. Proponents of that requirement had expected
ethanol to be the oxygenate of choice for fuel providers. It
was not regarded as a mandate to use ethanol, however, even by
its sponsors. During floor debate on the measure, Senator
Daschle, a co-sponsor of the amendment, stated that the oxygen
standard was fuel neutral. (congressional Record, March 29,
1989, page S3513) Most refiners, blenders, and importers opted
to use a cheaper and more easily used oxygenate, MTBE, in many
nonattainment areas. MTBE currently is used in approximately 45
percent of RFG, while ethanol is used in slightly less than 55
percent of that fuel. Twenty States currently have statutory
MTBE bans with 15 of those bans already in effect.
In late 1993, EPA issued final regulations implementing the
RFG program. In 1994, EPA issued another set of final rules
that revised the RFG program. The revisions included a
requirement that renewable oxygenates be used to meet 30
percent of the 2 percent oxygen content requirement in RFG. The
1994 rules were challenged by the American Petroleum Institute
and the National Petroleum Refiners Association. The DC Circuit
Court of Appeals decided that EPA lacked the authority to
impose the renewable requirement and vacated the 1994
rulemaking.
The principal benefits of oxygenates were the reduction of
carbon monoxide emissions through more complete fuel combustion
and the reduction of toxic air pollution. The oxygen content
requirement formally took effect in 1995 and is currently
satisfied by refiner use of either MTBE or ethanol. Today,
approximately two billion gallons of MTBE and 1.7 billion
gallons of ethanol (EtOH) are consumed to meet this RFG
requirement. Initially, most of the ethanol was produced and
consumed in the Midwest region of the country, but substantial
quantities are now used in the Northeast and in California as a
result of statewide MTBE bans in New York, Connecticut and
California. In addition to use in the RFG program, ethanol and
MTBE are used to help reduce emissions in carbon monoxide (CO)
nonattainment areas as part of the wintertime oxygenated fuels
program, which began in 1992. Originally, 40 CO nonattainment
areas were required to participate in this winter fuel program.
Today 15 areas in ten States participate, with ethanol as the
predominant oxygenate. Several hundred million gallons of
ethanol are used each year to satisfy this requirement.
Section 211(k)(2)(B) of the CAA provides EPA the authority
to waive the oxygen content requirement for RFG, in whole or in
part, for an ozone nonattainment area upon the determination by
the Administrator that compliance with the requirement would
prevent or interfere with the attainment of a National Ambient
Air Quality Standard (NAAQS). On April 12, 1999, California
submitted to EPA a petition requesting such a waiver. EPA
subsequently denied California's request. In providing the
States with access to this waiver authority on the condition of
meeting a relatively stringent test, and under EPA's authority
under Section 211(c)(4), Congress sought to balance the desire
for uniformity in our nation's fuel supply with the obligation
to empower States to adopt measures necessary to meet national
air quality standards.
Objectives of the Legislation
The Reliable Fuels Act, S. 606, is intended to address
existing and potential MTBE contamination.
In order to accomplish this objective, S. 606 achieves the
following items:
Authorizes $200 million from the Leaking
Underground Storage Tank (LUST) Trust Fund for State grants to
clean up MTBE and other ether gasoline additives. Also
authorizes an additional $200 million from the LUST Trust Fund
for State and Federal activities to prevent releases and
increase compliance under the UST program.
Requires EPA to phase down the use of MTBE
within 4 years of enactment. However, individual States may
authorize the use of MTBE within their borders if they so
desire.
Mandates the use of 6 billion gallons of
renewable fuels introduced into commerce by the year 2012.
Expands existing EPA authority to allow for
regulation of fuel additives for protection of water quality
(current law only allows for regulation to protect air
quality).
Repeals the Federal oxygen content requirement
for RFG 270 days after date of enactment.
Instructs EPA to require fuel and additive
manufacturers to conduct tests on a regular basis to determine
the health and environmental effects of new fuels and fuel
additives.
Requires EPA to study the health and
environmental impacts of using other additives as a substitute
for MTBE.
Requires EPA to release a draft fuel study
within 4 years of enactment. The study must contain an analysis
of the changes in emissions of air pollutants and changes in
overall air quality due to the use of fuels and fuel additives
resulting from this bill. The final study must be published not
later than 5 years from enactment.
Allows States a more streamlined procedure for
disallowing the waiver of the Reid Vapor Pressure limitation
for ethanol-blended gasoline.
Allows Governors to opt-in both classified and
non-classified areas of the Ozone Transport Region States to
the RFG program.
Authorizes a total of $1 billion over four
fiscal years for grants to merchant MTBE producers for
assisting in the conversion to production of other fuel
additives.
AREAS THAT USE REFORMULATED GASOLINE
as of April 14, 2005
Mandatory areas:
Los Angeles, CA
San Diego, CA
Hartford, CT
New York City (NY-CT-NJ)
Greater Philadelphia (PA-NJ-DE-MD)
Chicago, IL (IL-WI-IN)
Baltimore, MD
Houston, TX
Milwaukee, WI
Sacramento, CA
San Joaquin Valley, CA
District of Columbia
Maryland--the DC suburbs
Virginia--the DC suburbs
Atlanta, GA*
Baton Rouge, LA*
Opt-In Areas:
State of Connecticut (that portion not adjacent to NYC
or Hartford)
State of Delaware (that portion not part of
Philadelphia area)
Kentucky portion of the Cincinnati Metropolitan Area
Louisville, KY
Maryland-Queen Anne and Kent counties
State of Massachusetts
St. Louis, MO
New Hampshire portion of Greater Boston
The State of New Jersey (that portion not adjacent to
NYC or Philadelphia area)
New York--Dutchess County (near NYC) and part of Essex
County (upstate)
State of Rhode Island
Texas--Dallas/Fort Worth area
Virginia--Richmond, Norfolk-Virginia Beach-Newport News
* Applicability currently under litigation
Section-by-Section Analysis
Section 1. Short title; table of contents.
The bill is entitled ``The Reliable Fuels Act''.
TITLE I--GENERAL PROVISIONS
Sec. 101. Renewable content of gasoline.
Section 101 sets forth a comprehensive program to increase
the use of renewable fuels, in the United States. There are
several essential components of the program, which have been
carefully designed to achieve the overall goals. Changing any
of these essential components would undermine the objectives of
the program.
The first essential element is the overall size of the
renewable fuels mandate, and the schedule for its
implementation. To ensure that the Administrator of the
Environmental Protection Agency has adequate time to promulgate
regulations for implementation of the program, the program
begins in 2006. The program starts at 3.8 billion gallons of
renewable fuels in 2006, and escalates to 6.0 billion gallons
in 2012. Thereafter, the relative percentage of renewable fuels
required, as a percentage of gasoline in 2012, remains
constant. This phase-in schedule is essential to the success of
the program. The renewable fuels industry must be given an
opportunity to ramp-up production capacity and the petroleum
industry must be given an opportunity to make adjustments to
the refining, supply and distribution system necessary to
successfully implement the program.
The second essential element is the credit trading program.
The renewable fuels requirement is expected to be satisfied
primarily with the addition of ethanol to gasoline. Ethanol
blended gasoline cannot be transported in pipelines because of
ethanol's affinity for water. This means that the ethanol will
have to be transported separately to the terminals by rail,
truck, or barge. As the distance from the location of ethanol
manufacture to the terminal gets larger, so do the costs. In
addition, adding ethanol to gasoline increases the gasoline's
volatility. If the use of ethanol were required in low-
volatility gasoline the industry would be forced to incur the
additional costs of offsetting ethanol's impact on volatility.
The credit trading provisions allow the ethanol to be used
where it makes the most economic and environmental sense while
providing a mechanism to transfer those credits back to the
point of gasoline production or importation so that refiners,
blenders, and importers can demonstrate compliance with the
renewable fuels obligation.
The credit banking and trading provisions of the bill give
the Administrator the flexibility to design a workable program.
While refiners, blenders, and importers will ultimately be
responsible for meeting the renewable fuels obligation, the
fact is that most of the ethanol that is required under this
program will be added to gasoline at the distribution
terminals, because ethanol cannot generally be transported with
gasoline in pipelines. Under the credit banking and trading
provisions of the bill, the Administrator is required to
provide for the `generation of an appropriate amount of credits
by any person that refines, blends, distributes or imports
gasoline that contains renewable fuels'. This would include the
owners and operators of the distribution terminals.
The program requires the use of renewable fuels in
gasoline. The requirement can be met by adding ethanol to
gasoline (i.e., gasohol), or through the use of alternative
fuels like 70 and 85 percent ethanol fuels (i.e., E70, E85). In
addition, ethanol made from cellulosic biomass is encouraged by
counting each gallon of ethanol produced from cellulosic
biomass as if it were 1.5 gallons of corn-based ethanol. This
should encourage expansion in the cellulosic biomass ethanol
industry, which makes ethanol from feedstocks like woodchips
and switchgrass. In addition, the program allows for the
generation of credits from the use of biodiesel.
The renewable fuels obligation is an annual average
obligation for the use of renewable fuels. It is believed that
the use of ethanol to meet this requirement will be fairly
uniform throughout the year. Nevertheless, to ensure this, the
Administrator is required to assess the use of ethanol
throughout the year and in the event that less than 35 percent
is used in either the winter or summer periods, the
Administrator is directed to promulgate regulations to ensure
that at least 35 percent of the required amount is used in each
period. If the Administrator promulgates such rules, the life
of credits will be extended for an additional year.
The bill provides for waivers from the program under
certain circumstances. Upon petition by one or more States, the
bill allows the Administrator to waive the program, in whole or
in part, based on a determination that the renewable fuel
requirement would severely harm the economy or environment of a
State, region, or the U.S. in general, or based on a
determination that there is an inadequate domestic supply or
distribution capacity to meet the renewable fuel requirement.
The bill requires the Secretary of Energy to assess whether the
program requirements would likely result in significant adverse
impacts on consumers in calendar year 2006 and if so, requires
the program to be waived in calendar year 2006 to avoid any
such adverse impacts on a national, regional or State basis.
In addition, the bill exempts small refineries from
participating in the program until 2011, and requires this
exemption to be extended for not less than 2 years for any
small refinery for which compliance with the program is found
to impose a disproportionate economic hardship as determined by
a study conducted by the Secretary of Energy. In the bill,
small refineries are allowed to waive this exemption and opt-in
to the program earlier than 2011, as well as petition for an
extension of the exemption at any time.
The bill also requires that a market concentration analysis
of the ethanol production industry be performed annually by the
Federal Trade Commission (FTC) to determine whether there is
sufficient competition within the industry. There is concern
among some that insufficient competition within the industry,
particularly in combination with a federally mandated renewable
fuel program, could lead to price-setting and other anti-
competitive behavior. The FTC is to use the Herfindahl-
Hirschman Index (HHI) to measure market concentration, which is
a standard tool used by the FTC and the Department of Justice.
Any industry with an HHI score above 1800 is considered to be
highly concentrated. The committee recognizes that the HHI is
one among many indicators of possible anti-competitive
behavior.
The bill contains a safe-harbor provision regarding the
liability of manufacturers and distributors of renewable fuels
that are subject to the bill's mandate. The principle behind
this provision is simple. No one should be subject to tort
liability simply for manufacturing or selling a product that
was mandated by Congress. The provision applies only to claims
that a renewable fuel mandated by the act constitutes a
defective product in its design, manufacture or marketing.
Some have argued that imposition of strict product
liability is a prerequisite for appropriate remedial actions.
This view is incorrect. First, negligence theories more than
suffice to address possible remedial questions. Second, the use
and improvement of the UST program in this legislation,
provides a fair and efficient mechanism to address potential
contamination problems. Third, strict liability theories are
highly inefficient mechanisms for addressing water quality
concerns. For example, a recent report from the Council of
Economic Advisors found that using the tort system in this way
`is extremely inefficient, returning only 20 cents of the tort
cost dollar for that purpose.' (Council of Economic Advisors,
Who Pays for Tort Liability Claims? An Economic Analysis of the
U.S. Tort Liability System, April 2002, at 9).
Congress has extended liability protections in a variety of
settings, including medical care, firefighter assistance,
educational institutions, firearms, nuclear energy, and many
other areas when sound public policy or fairness demands such
an extension.
To address the uncertainty regarding the long-term health
and environmental effects of renewable fuels the bill requires
EPA to conduct studies of those effects. If those studies show
that additional regulation is necessary, the Administrator has
the authority to initiate a rulemaking. Liability protection
under the bill would depend on compliance with applicable rules
that the Administrator may adopt. This balanced approach will
protect the public from adverse health and environmental
impacts from renewable fuels while not exposing manufacturers
and distributors to tort lawsuits for complying with the
renewable fuels mandate of the bill.
Some have contended that this provision would give
`polluters . . . sweeping liability exemptions for damage to
public health or the environment resulting from renewable fuels
or their use in conventional gasoline.' Nothing could be
further from the truth. In the first place, the safe harbor
provision does not affect claims based on the wrongful release
of a renewable fuel into the environment. Those responsible for
releases to the environment receive no protection whatsoever.
Moreover, the safe harbor only applies if the maker or seller
of a renewable fuel complies with EPA regulations to protect
the public health and environment. Under this bill, the
Administrator has the authority to control or even prohibit the
sale of renewable fuels that may adversely affect air or water
quality or the public health. There is no safe harbor if the
Administrator's rules are violated.
Under existing section 211(h) of the Clean Air Act, the
Administrator was required to promulgate regulations to reduce
the volatility of conventional (i.e., non-reformulated)
gasoline by limiting its Reid vapor pressure (RVP). Reid vapor
pressure is a method for determining gasoline's volatility.
Those regulations have long since been established and they
require that during the summer high-ozone season the RVP of
conventional gasoline not exceed 9.0 pounds per square inch
(psi) in ozone attainment areas and northern ozone non-
attainment areas, and 7.8 psi in southern ozone nonattainment
areas. Section 211(h) also recognizes, however, a 1.0 psi RVP
waiver for gasoline containing 10 percent denatured anhydrous
ethanol. This means that under the Agency's regulations
gasoline containing ethanol can have an RVP of 10.0 psi in
ozone attainment areas and northern ozone nonattainment areas,
and 8.8 psi in southern ozone nonattainment areas. In addition
to the Federal RVP regulations, the Agency has also approved
numerous State RVP controls under section 211(c)(4)(C) of the
Act, upon a demonstration by the State that the RVP controls
were necessary to achieve a national ambient air quality
standard and that there were no reasonable and practicable non-
fuel measures available that would bring about timely
attainment.
The one-pound RVP waiver for ethanol blends of conventional
gasoline is important for supply reasons. Because of the
waiver, ethanol can be splash blended into finished gasoline at
the distribution terminals. In other words, because of the
waiver, the gasoline can be sold either with ethanol or without
it. In contrast, if the waiver were not allowed, special low
volatility blendstocks would be required to compensate for
ethanol's impact on gasoline volatility. This has implications
for the supply and distribution of gasoline. Without the one-
pound waiver, gasoline could be stranded if there is not
ethanol available to blend with it. Section 819(c) of the bill
contains provisions to ensure that there is adequate lead-time
and that supply considerations are taken into account.
Section 101(c) of the bill retains the one-pound RVP waiver
for ethanol blends of conventional gasoline. However, the bill
also provides States an expedited process to eliminate the one-
pound waiver in any area of a State if the State demonstrates
to the Administrator that the one-pound waiver will increase
emissions that contribute to air pollution in any area in the
State. It is the intent of this provision to require such a
demonstration for any area of the State for which the one-pound
waiver would be eliminated. In addition, while it is the intent
of this provision to establish an expedited process by which
the State can request the Administrator to eliminate the one-
pound RVP waiver, it is not the intent to expand the authority
of the Governor of a State beyond what he or she may have under
State law. Furthermore, it is expected that the supporting
documentation submitted by the Governor in support of the
notification to eliminate the one-pound waiver would include a
detailed analysis, including urban/regional airshed modeling,
of the impact of the one-pound waiver on air quality in any
area of the State where the Governor seeks to have the one-
pound waiver eliminated.
Sec. 102. Renewable fuel.
The bill requires the Administrator to conduct, with
respect to each conventional gasoline use area and each
reformulated gasoline use area in each State, a survey to
determine the market shares of various types of fuels with
ethanol or renewable fuels. The report is to be submitted to
Congress.
The bill provides limited Federal assistance for the
development of ethanol production capabilities. It is the
committee's intent that such assistance be targeted to those
areas of the country that currently has low rates of ethanol
production.
For example, the bill requires the Secretary of Energy to
establish a 10-year program to provide Federal loan guarantees
for construction of facilities that convert municipal solid
waste into fuel ethanol. The Secretary is directed to give
preference to applicants located in markets with the greatest
need for such a facility, either because of limited
availability of land for waste disposal or because of a high
level of demand for fuel ethanol due to low local production
rates of fuel ethanol.
The bill also requires the Administrator to provide grants
for the research, development, and implementation of renewable
fuel production technologies. Grant eligibility is limited to
entities located in `RFG States,' or States containing one or
more covered areas as defined in section 211(k)(10)(D) of the
Clean Air Act (42 U.S.C. 7411(k)(10)(D)). Eligible entities
must be academic institutions or consortia comprised of
combinations of academic institutions, industry, and government
in such States. The bill authorizes $25 million for each of
fiscal years 2006 through 2010 for the grant program.
The committee's bill authorizes loan guarantees for up to 4
cellulosic ethanol commercial demonstration projects under the
Federal Non-Nuclear Energy Research and Development Act of
1974. These projects will produce cellulose ethanol from
agricultural residue or municipal solid waste. The guarantees
may be on a non-recourse basis. Loan guarantee fees may not
exceed 1 percent of the outstanding indebtedness covered by the
guarantee.
In order to ensure that private sector applicants under
this program bear an appropriate level of risk, the authority
to guarantee loans is limited by the requirement that
applicants provide financial and technical assurances. These
requirements are designed to reflect commercial lending
practices. The requirements also are designed to ensure that
substantial private sector risk precedes any government risk.
While any commercial technology demonstration carries inherent
risk, placing a substantial portion of that risk on the private
sector applicant should ensure that only the most robust
projects with highest probabilities for commercial success are
considered. To be funded, a project must meet the following
criteria and conditions:
Validation of Project Design: The project
design must have been validated through the operation of a
continuous process facility with a cumulative output of at
least 50,000 gallons of ethanol, with a significant fraction
being produced using the same protocols as incorporated into
the design of the commercial facility.
Technical Review: A project must undergo a
full technical review. Full technical review shall consist of a
due diligence review of the project design specifications.
Economic Viability: The project must be
economically viable. To meet this requirement, the project must
have (1) long-term sales contracts for ethanol off-take, (2)
data showing historical production levels of feedstock
substantially in excess of project requirements, (3) multi-year
contracts for feedstock acquisition, (4) minimum inventory
levels sufficient to protect against disruptions in feedstock
supply, and (5) strategies for protection against weather
risks.
Adequate Project Performance Guarantees: The
project must have adequate project performance guarantees,
including----
-Construction completion guarantees under which the
project has binding commitments to complete the
construction of the project to the original design
specifications, backed by a performance bond with a
maximum completion price.
-Project startup guarantees under which the project has
a binding commitment from the project sponsors to
contribute additional financial resources, up to a
level equal to 50 percent of their initial equity
investment, to correct shortfalls in technical
performance levels during the initial 2 years of
project operation. Such additional contributions shall
be triggered if the technical performance shortfall
poses significant risk to the projected debt repayment
schedule.
-Sustained operation guarantees under which the Federal
Government has recourse to reimbursement from project
participants in the event that the project defaults on
the loan. Each project participant shall provide a
binding commitment to reimburse the Federal Government
for losses in the event of a default, capped at an
amount equal to the funds paid by the project to that
party for the supply of goods and services, less all
reasonable direct and indirect costs incurred by the
party for the provision of such goods and services,
over the 4-year period preceding the default. The
project participants subject to this guarantee shall
include the primary licensors of cellulose conversion
technology, the supplier of biocatalysts to the
project, and any equity participants providing design,
project management or other services.
The extent of recourse by the Federal Government shall be
limited to the performance guarantees described above.
Reasonable Assurance of Repayment: There must
be reasonable assurance of repayment of the loan. To meet this
requirement:
-The project must have been subjected to a
probabilistic risk analysis of project volatility that
demonstrates positive economic returns to the equity
investors and full repayment of the loan under median
conditions. The risk analysis shall (1) identify the
major elements of risk and volatility and the parties
bearing the risk, (2) estimate risk values for each
element, and (3) identify and evaluate mitigation
measures to reduce the level of volatility in the
estimates.
-The project must have binding commitments from equity
investors to provide an initial equity contribution
equal to at least 20 percent of the total project cost,
as well as any additional financial contributions
needed to meet performance guarantees for construction
completion, startup and sustained operations.
-The project equity investors must make their
contributions proportionally with disbursements of
loans backed by the Federal guarantee.
The criteria and conditions set forth above for selecting
projects and issuing loan guarantees should be strictly
followed to ensure that the program is financially sound, while
furthering the production of cellulose-based ethanol. At the
same time, these criteria and conditions should in no way lead
to lengthy technical or financial due diligence reviews by DOE,
especially in light of the 90-day deadline for DOE to approve
or reject project applications.
If current appropriations are insufficient to cover all
three projects, project applications will be acted on as they
are received. Additional projects will be funded to the extent
appropriations are available for subsequent fiscal years.
If the Federal Financing Bank exercises its authority to
make a direct loan to a project under the Federal Financing
Bank Act of 1973, the rate of interest on such loan shall not
exceed the yield on Treasury securities of comparable maturity.
Additionally, this language incorporates by reference the
limitations under existing law for the application of loan
guarantees. These most significant of these are listed below.
Key Statutory Provisions of Sec. 19 to the Federal Non-Nuclear Energy
Research and Development Act of 1974 (Loan Guarantees)
(1) Guaranteed obligations not subordinated to other debt.
(2) Term of guarantee may not exceed 20 years (or if less
90 percent of useful life).
(3) DOE can require project to convert to conventional
financing after 12--13 years (or pay additional fee of 1
percent of remaining obligation).
(4) DOE can make advance commitments to issue loan
guarantees.
(5) DOE may make advances to avoid default. Secretary is
subrogated to rights of lender in the event of default.
(6) Administrative fee of at least 1 percent of guarantee.
(7) Applicant must be a U.S. citizen (see 46 CFR 802).
(8) Intellectual property rights are governed by '19(g)(4).
(9) Department of Treasury concurrence on each loan
guarantee.
Sec. 103. Survey of renewable fuels consumption.
The bill requires the Administrator to conduct and publish
a survey of renewable fuels consumption in the motor vehicle
fuels market on a monthly basis. In developing and conducting
this survey, the Administrator shall protect the
confidentiality of the responses to the survey and shall
include the bill's specified elements of the survey.
TITLE II--FEDERAL REFORMULATED FUELS
Sec. 201. Short title.
This subtitle may be cited as the ``Federal Reformulated
Fuels Act of 2005''.
Sec. 202. Leaking underground storage tanks.
Summary
The bill authorizes appropriations not to exceed $200
million from the Leaking Underground Storage Tank (LUST) Trust
Fund to be used for cleanup and treatment of MTBE. The bill
authorizes an additional $200 million over 6 years from the
LUST Trust Fund for EPA and States to conduct inspections,
issue orders, and bring actions under Subtitle I of the Solid
Waste Disposal Act.
Discussion
In 1984, Congress enacted, as Subtitle I of the Solid Waste
Disposal Act, a comprehensive program to address the problem of
leaking underground storage tanks. Among other things, the
program required EPA to develop leak detection and prevention
standards for underground storage tanks (USTs). It authorized
the Agency to compel tank owners and operators either to take
corrective action to clean up leaking tanks and comply with
standards for USTs or to close the tanks. States have largely
taken the lead in implementing and enforcing the program
requirements, including corrective action requirements.
States receive Federal funds from the LUST Trust Fund.
Revenue for this Fund comes from a one-tenth of one cent tax on
all petroleum products. This tax generates approximately $170
million per year. The interest on the principal in the fund
generates approximately $70 million annually (roughly the
amount of annual appropriations from the LUST Trust Fund).
Amounts are appropriated each year from the Trust Fund for
the States and EPA to implement and enforce the UST corrective
action requirements; to conduct cleanups in certain limited
situations where there is no financially viable responsible
party or where a responsible party fails to undertake the
appropriate corrective action; to take corrective action in
cases of emergency; and to bring cost recovery actions against
parties to seek reimbursement of costs expended from the Fund
to clean up sites. The balance of the Trust Fund is
approximately $2.25 billion. The annual appropriation from the
Trust Fund for fiscal year 2005 was approximately $70 million.
Congress has appropriated approximately $10 million per year
from general revenues for State implementation of leak
prevention and detection programs.
In addition to the Federal LUST Trust Fund, many States
have also established funds, capitalized through State gas
taxes, fees, and other mechanisms, to pay for cleanups and to
provide assistance to tank owners in complying with other
requirements. States spend approximately $1 billion per year
from their trust funds. In recent years, however, the claims
against those funds have risen dramatically.
More than a million leaking USTs have been closed under
this program., EPA estimates that over 670,000 active USTs
contain petroleum products. Some of these tanks have leaks,
causing potential harm to human health and the environment. A
number of recent, high profile contamination cases have
highlighted this problem. MTBE has been detected at thousands
of leaking UST sites. In some cases, drinking water wells have
been closed due to these releases of MTBE. According to EPA,
States have reported more than 450,000 confirmed releases from
USTs. Cleanups have been initiated for more than 400,000
releases and almost 320,000 cleanups have been completed. In
spite of this progress, many thousands of cleanups remain to be
completed. EPA, States, and the private sector have suggested
that lack of resources, both for cleanup and for inspections
and enforcement, have limited efforts to fully address MTBE
contamination and leaking USTs. Title 2 of this bill addresses
these concerns.
Section 2 reconfirms the authority of the Administrator and
the States to use funds from the LUST Trust Fund for the
cleanup of sites contaminated by MTBE from leaking USTs. In
addition, Section 2(a) authorizes the Administrator and the
States to conduct such cleanup activities using specifically
designated funds made available under new Section 9011(a) from
the LUST Trust Fund. In order to undertake a corrective action
under this subsection, the Administrator or a State must still
comply with the requirements of Section 9003(h)(2) of the Solid
Waste Disposal Act. States are to exercise this authority in
accordance with their cooperative agreements.
Relatively low levels of MTBE can be detected in
groundwater. The detection of MTBE, by taste and smell, can
make the water unpalatable, but not necessarily harmful. This
section amends Section 9003 of the Solid Waste Disposal Act to
clarify that the Administrator and the States may undertake
corrective actions whenever the presence of MTBE in groundwater
presents a threat to public welfare, even in situations where
the level of MTBE is not so high as to present a threat to
human health.
Section 2 amends Subtitle I of the Solid Waste Disposal Act
by creating a new Section 9010 giving States greater
flexibility in their use of LUST funds. New Section 9010
authorizes EPA and the States to use funds appropriated from
the LUST Trust Fund to conduct inspections, issue orders, or
bring actions under Subtitle I. Funding authorized under this
section is for both formal enforcement actions, such as
judicial actions and administrative orders, and related
measures to secure compliance, such as notices of violation or
warnings. This increased funding for inspections and
enforcement related activities will enable States and EPA to
secure greater compliance with UST standards. Increased
compliance will avoid future releases and resulting cleanup
costs. Funds authorized under this provision may be used for
cost recovery.
This section does not change current law on State authority
under authorized programs or Federal authority to enforce the
requirements of Subtitle I. Nor does this provision affect
EPA's authority to use other funds to enforce the UST program.
EPA receives funding from sources other than the LUST Trust
Fund to undertake inspection and enforcement related activities
for leak detection and other preventive requirements. Any LUST
Trust Fund appropriations used for such enforcement activities
by EPA are expected to supplement funds that the Agency has
been receiving, and will continue to receive, from sources
other than the LUST Trust Fund.
In addition to authorizing funding for States and EPA for
federally authorized programs, this section authorizes States
to use funds to undertake inspection and enforcement related
actions for State tank leak detection, prevention, and other
requirements through State programs with requirements that are
similar or identical to Subtitle I. State agencies currently
receive funding from EPA from sources other than the LUST Trust
Fund to undertake such activities for leak detection and other
preventive requirements. It is expected that States will
continue to receive funding from EPA from these other sources,
as well as from the LUST Trust Fund, for these activities. Any
LUST Trust Fund appropriations used for enforcement related
activities by States should supplement funds that the States
have been receiving, and will continue to receive, through
grants authorized under Section 2007(f).
Section 2 also creates a new Section 9011 to increase the
levels of authorized funding for measures related to corrective
actions and enforcement. This section authorizes appropriations
for two major and equally important activities--funding an
immediate need to address MTBE, which is currently coming from
leaking underground tanks and is creating problems in numerous
drinking water wells, and facilitating inspection and
enforcement activities to avoid similar problems being created
in the future. Section 9011(1) authorizes a one-time
appropriation of $200 million for corrective actions with
respect to MTBE. The bill authorizes substantial funding to
clean up MTBE contamination in recognition of the fact that
this problem has arisen, in part, as a result of increased use
of MTBE by refiners in an effort to meet Federal oxygenate
requirements. Section 9011(2) authorizes an additional $200
million over the period between fiscal years 2005 through 2010
to conduct inspections or issue orders or bring actions under
Subtitle I. There is broad consensus that more resources are
needed to conduct inspections to ensure that underground tanks
comply with applicable regulations and to ensure early
detection of leaks and other problems. EPA has estimated that
it would cost approximately $93 million over what is currently
appropriated for the first year, and $70 million each year
thereafter, to inspect facilities on an annual basis. A
biannual inspection schedule would cost approximately $63
million over what is currently appropriated for the first 2
years combined, and $20 million additional annually thereafter.
Sec. 203. Restrictions on the use of MTBE.
Summary
Section 203 restricts the use of MTBE, but allows States to
individually authorize the sale and use of MTBE within their
own borders.
Discussion
While the States can authorize the sale and use of MTBE,
they cannot require its sale or use. Section 203 also clarifies
the Administrator's authority to allow trace quantities of MTBE
notwithstanding the prohibition on MTBE use. This provision
recognizes that MTBE has been used in gasoline for over 20
years, and as such will be present in trace quantities
throughout the distribution system even after its use in motor
fuels is prohibited. Recognition of such trace quantities is
also appropriate because MTBE may be generated as a trace
byproduct in the production of other gasoline components.
The bill provides for transition assistance to merchant
MTBE manufacturers. To be eligible for such assistance, the
manufacturer must be making MTBE at time of enactment through
the time that the prohibition on MTBE use takes effect. This
provision recognizes that although Congress has reconsidered
the relative value of MTBE, Congress also recognizes that MTBE
is an integral part of the fuels system as a result of the
reformulated gasoline oxygen content requirement and that lead-
time must be provided to allow the industry to transition to
substitutes. Essentially, transition assistance is premised on
the facts that: (1) MTBE is widely used because of a Federal
mandate, the oxygen content requirement; (2) MTBE has been
effective in addressing the energy and environmental concerns
that lay at the heart of a larger Federal program requiring the
use of RFG; (3) the government, as a result of the first two
points, bears great responsibility for any attendant losses
attributable to the change in legal status of MTBE; and (4)
failure to address the consequences of this change in status
may undermine any incentive for additive manufacturers to
produce new generations of additives that will be needed to
replace MTBE and to meet future energy and environmental goals.
Sec. 204. Elimination of oxygen content requirement for reformulated
gasoline.
In addition to repealing the reformulated gasoline oxygen
content requirement and ensuring that the air toxics benefits
of the reformulated gasoline program are maintained, this
provision requires EPA to simplify the existing reformulated
gasoline regulations by replacing the less stringent VOC
Control Region 2 requirements with the more stringent VOC
Control Region 1 requirements. (204(d)) This change has no
effect on the VOC adjustment that currently applies to ethanol
blends of reformulated gasoline in Milwaukee and Chicago or on
the Agency's authority to expand that adjustment to other
reformulated gasoline areas.
Section 204(b). The goal of this provision is to ensure
that real world air toxic emission reduction benefits are
maintained, as recommended by EPA's Blue Ribbon Panel on
Oxygenates in Gasoline. The petroleum industry did much better
than required by law when it came to reducing toxic air
pollutant emissions from reformulated gasoline. In fact, the
industry did better in Phase I (1995-1999) of the reformulated
gasoline program than it was even required to do under the more
stringent Phase II (2000 and beyond) requirements. Concerns
were raised by the Blue Ribbon Panel that some of these real
world benefits could be lost as a result of repeal of the
reformulated gasoline oxygen mandate and phase-down in MTBE
use. This provision ensures that those real world benefits are
not lost.
To ensure that the air toxics benefits of the reformulated
gasoline program are maintained, the Administrator promulgated
the Mobile Source Air Toxics Rule (MSAT Rule) on March 29,
2001. That rule requires that refineries and importers continue
to attain the same level of air toxics performance that they
attained in 1998-2000. The more stringent standards imposed by
the rule do not apply to incremental volumes of reformulated
gasoline production, i.e., production in excess of what the
particular refinery or importer produced in 1998-2000. Gasoline
production above the baseline volumes is subject to the Phase
II reformulated gasoline standards, which require a 21.5
percent reduction in aggregate air toxics emissions reductions,
relative to 1990 baseline levels. EPA excluded these
incremental volumes from the more stringent standard because
the Agency did not want to discourage the production of
reformulated gasoline and because the incremental volume
adjustment is `unlikely to have a material impact on air toxic
emissions from gasoline.' 66 Fed. Reg. 17230, 17249 (March 29,
2001).
Section 204(b) of the bill improves EPA's existing rule in
two ways. The provision requires EPA to promulgate a rule
within 270 days of enactment to establish `for each refinery or
importer (other than a refinery or importer in a State that has
received a waiver under section 209(b) with regard to gasoline
produced for use in that State), standards for toxic air
pollutants from use of the reformulated gasoline produced or
distributed by the refinery or importer that maintain the
reduction of the average annual aggregate emissions of toxic
air pollutants for reformulated gasoline produced or
distributed by the refinery or importer during calendar year
1999 and 2000 . . . . ' It is the intent of this provision that
EPA expeditiously revise the mobile source air toxics rule
promulgated on March 29, 2001, to change the baseline
provisions from 1998-2000 as in the existing rule to 1999-2000.
In addition, to ensure that the average annual aggregate
air toxic emission reduction benefits are maintained on a
regional basis, defined to be a PADD (Petroleum Administration
for Defense District), the Administrator is required to
continue to monitor average annual aggregate air toxics
emissions to ensure that the performance achieved in 1999-2000
is maintained into the future. If the Administrator determines
that average annual aggregate air toxics emission reductions
are not maintained in any PADD, relative to 1999-2000
performance, the Administrator is required to expeditiously
revise the mobile source air toxics rule to eliminate the
incremental volume exclusion in MSAT for reformulated gasoline.
Section 204(c) permits commingling at retail stations of
Reformulated Gasoline (RFG) containing ethanol and RFG that
does not contain ethanol. This provision is intended to
increase retailer flexibility during times of tight RFG
supplies by permitting them to switch between different types
of RFGs without draining their underground storage tanks, while
at the same time maintaining environmental protections inherent
in the RFG program. This provision will be included in section
211(k) of the Clean Air Act.
As a practical matter, commingling is unlikely to occur on
a regular basis. Most gasoline markets are not likely to be
supplied with various gasoline formulations. In addition, it is
undesirable for retailers to switch back and forth between
ethanol-blended and other types of gasoline due to the effects
that ethanol has on dispenser seals, and the need for more
frequent filter change-outs. However, if faced with a tight
market, a commingling allowance provides flexibility to
retailers to supply gasoline to end-users.
There is concern that widespread commingling of ethanol
with non-RVP-adjusted gasolines could increase VOC emissions.
This section requires that retailers certify that the
commingled product meet all content and emissions performance
standards for reformulated gasoline. In addition, emission
control strategies already in place would limit the amount of
VOCs that could actually escape into the environment. These
include Stage I&II vapor recovery (in nonattainment areas),
pressure/vacuum valves on tank vents, on-board refueling vapor
recovery systems, and on-board vehicle vapor controls. This
provision is not intended to authorize or allow the U.S.
Environmental Protection Agency or any other State or Federal
Government agency to require that gasoline be reformulated to
provide an adjustment to offset any potential VOC emissions
increase from retail commingling.
In addition, any party other than the retailer shall not be
subject to an enforcement action or penalties under section (d)
solely arising from the commingling of compliant gasolines by
the retailer, unless the other party caused commingling that
was not intended by the retailer or unless the other party
failed to complete the quality assurance and oversight measures
specified under current gasoline regulations.
Section 204(e) This provision expressly preserves baseline
adjustments granted previously under 40 CFR 80.915(g) of the
Mobile Source Air Toxic rule, but only to the extent they are
based on the 1999-2000 base period adopted by this Section. It
also allows the Administrator to make adjustments applicable to
the refinery specific standards that a refiner must meet under
clause (b)(2) of Section 204.
The Administrator may, but is not required, to change a
`clean gasoline producer' baseline adjustment to reflect the
Federal MTBE ban, but may not lower a refiner's baseline to
less than the average reduction in toxic air emissions in
reformulated gasoline supplied to PADD I during the calendar
years 1999-2000.
Sec. 205. Public health and environmental impacts of fuels and fuel
additives.
Summary
The bill directs the Administrator to require tests to
determine potential public health effects of fuels or fuel
additives prior to registering fuels or fuel additives and
during their use. Studies under this provision will be
conducted on a regular basis. In addition, EPA is instructed to
study the health and environmental impacts of using ETBE and
other additives as a substitute for MTBE.
Discussion
The existing law requires the Administrator to require fuel
and additive manufacturers to conduct tests to determine the
potential health and environmental effects of fuels and fuel
additives.
The Administrator should use this authority to identify and
assess any adverse public health, welfare, or environmental
effects from the use of motor vehicle fuels or fuel additives
or the combustion products of such fuels or fuel additives. The
Administrator should use the authority to assess threats to
both air pollution and water pollution in order to effectively
exercise the authority in Section 211(c) as amended by this
legislation. This provision is intended to prevent situations
such as the one presented by MTBE contamination of water
supplies.
To avoid such recurrences, the Blue Ribbon Panel on
Oxygenates in Gasoline recommended that EPA and others
accelerate ongoing research efforts into the inhalation and
ingestion health effects, air emission transformation
byproducts, and environmental behavior of all oxygenates and
other components likely to increase in the absence of MTBE.
This should include research on ethanol, alkylates, and
aromatics, as well as on gasoline compositions containing those
components.
Sec. 206. Analyses of motor vehicle fuel changes.
Summary
Section 206 requires the Administrator to publish an
analysis of the changes in emissions of air pollutants and air
quality due to the implementation of the provisions in S. 606.
The analysis is to examine changes in all motor vehicle fuels
and fuel additives and must attempt to identify and quantify
any increase in emissions or air pollution caused by
implementing this bill. A draft analysis is to be published
within 4 years of enactment, and a final analysis is to be
published within 5 years of enactment. The Administrator should
include in the analysis consideration of direct and evaporative
emissions, as well as combustion by-products, from the use of
these fuels and fuel additives in highway and non-road
vehicles.
Section 206 requires the Administrator to develop and
finalize an emissions model that reasonably reflects the
effects of characteristics or components of motor vehicle fuel
or emissions from vehicles in the motor vehicle fleet during
calendar year 2007. Further, this section requires the
Administrator to conduct a study 1 year after enactment of the
permeation effects of ethanol in gasoline and report its
findings to Congress.
Discussion
Section 211(c) of the CAA, as amended by this legislation,
provides the Administrator with the authority to regulate,
control, or prohibit the manufacture, introduction into
commerce, offering for sale, or sale of any fuel or fuel
additive, if, in the judgment of the Administrator, the fuel or
fuel additive or emission product causes or contributes to air
pollution or water pollution that may reasonably be anticipated
to endanger the public health or welfare. The bill requires the
Administrator to exercise this authority with respect to MTBE.
The bill also adds water quality as an environmental protection
criterion in Title II of the Act.
Section 202(l) of the Act requires the Administrator to
exercise the authorities in Sections 211(c) and 202(a) and to
promulgate, and from time to time revise, regulations
containing reasonable requirements to control hazardous air
pollutants from motor vehicles and fuels. The regulations must
reflect the greatest degree of reductions achievable,
considering cost and projected available technology, and must
focus on those categories of emissions that pose the greatest
risk to human health or about which significant uncertainties
remain.
The emissions model currently used by EPA to determine
compliance in both the RFG and conventional anti-dumping
gasoline programs is called the complex model. It uses 1990
average gasoline quality and 1990 model year motor vehicle
technology as its baseline, and models how changes in gasoline
qualities change emissions of these vehicles compared to 1990
gasoline. For purposes of this provision, EPA is authorized to
update its complex model to address changes in motor vehicle
technology since 1990. The motor vehicle fleet in calendar year
2005 will be different from model year 1990 vehicles. The
updated model is expected to contain a mix of technologies
with, for example, the newer Tier 2 technology entering the
fleet.
Developing an emissions model that reflects the actual mix
of motor vehicle technologies in the fleet during calendar year
2007 allows EPA to reasonably determine the change in emissions
between 1999-2000 and 2006-2007 due to changes in gasoline, as
the 2007 calendar year fleet should still contain the kinds of
technologies found in the prior years, although with a
different mix of technologies. EPA should work with a
consortium of the automobile and oil industries and other
interested and qualified parties to design and conduct the
extensive vehicle and fuel combination testing that will be
necessary to update the complex model, as was done in
developing the current complex model.
An updated complex model may be useful for other related
applications, such as emissions modeling for State planning.
EPA could use the updated model in the RFG and conventional
gasoline programs, including future RFG rulemakings, where
doing so would not be inconsistent with the provisions of
Section 211(k).
Sec. 207. Additional opt-in areas under reformulated gasoline program.
Summary
This section of the bill provides explicit State authority
to allow non-classified areas in the Ozone Transport Region to
opt-in to the RFG program.
Discussion
Currently, 17 States and the District of Columbia rely on
the RFG program as an emissions control strategy. Appendix II
provides a complete list of all RFG areas. The CAAA mandated
use of RFG in nine areas. Several States (13) have exercised
the opt-in authority of Section 211(k)(6) to require the use of
RFG. Areas that opted in to the RFG program prior to January 1,
2000, are required to use RFG until December 31, 2003. The Act
limits opt-in actions to areas that previously violated the 1-
hour ozone NAAQS and are classified according to their current
status in relation to attainment of the NAAQS. States expend
considerable resources in an effort to avoid violating the
NAAQS because of the stringent requirements imposed on
nonattainment areas by the CAA. This section allows use of the
RFG program for those areas in the Ozone Transport Region that
seek to use it as an emissions control technique in the State's
strategy for avoiding new violations of the NAAQS. Under this
provision, once the SIP revision is approved the area will be a
covered area under the Federal program.
Sec. 208. Federal enforcement of State fuels requirements.
Summary
This provision requires EPA to enforce State fuels controls
and prohibitions approved by the Administrator under section
211(c)(4)(C) of the Act, if the State so requests.
Discussion
Under section 211(c)(4)(C), EPA may approve an otherwise
preempted State fuel control or prohibition if the State
submits a revised implementation plan to the Administrator and
demonstrates that the State fuel controls or prohibitions are
necessary to achieve the national ambient air quality standard
that the State's plan implements and that there are no other
reasonable and practicable non-fuel measures available that
would bring about timely attainment. Because of the national
character of the fuels industry and the way that fuels are
distributed in fungible streams, State fuel controls and
prohibitions have long been recognized as the control of last
resort. The new provision does not change these basic
principles. The States would still be required to submit a
revised implementation plan that meets the requirements of
section 110 of the Act, including the requirement that the
controls be enforceable by the State as a practical matter.
This means that States are still required to have their own
enforcement programs if they want to impose fuel controls or
prohibitions that differ from the controls and prohibitions
imposed by EPA under section 211 of the Act. The only effect of
the new provision is that if a State meets all of the existing
requirements under section 110 and 211(c)(4), the State can
request that the Administrator take a more active role in
enforcement of those regulations.
Sec. 209. Fuel system requirements harmonization study.
Summary
The Administrator of the Environmental Protection Agency
and the Secretary of Energy shall jointly conduct a study of
Federal, State, and local requirements concerning motor vehicle
fuels.
Discussion
In the last several years, multiple unique gasoline blends
required in different parts of the country have led to reduced
fungibility in gasoline distribution systems and exacerbated
shortages when supply disruptions have occurred. Several
studies of this `boutique fuels' problem have identified it as
a contributing factor to increased price volatility and market
tightness. This bill takes the first step in addressing
boutique fuels by making major changes to Federal fuels
requirements: a Federal phase-out of MTBE; repeal of the RFG
oxygen content mandate; and a new Renewable Fuels Standard with
a credit banking and trading program. Section 209 takes the
next step by requiring DOE and EPA to conduct a comprehensive
study on how the various fuels requirements affect several
things, including (1) the supply of fuels available to
consumers; (2) achievement of air quality goals; (3) the fuel
distribution system; and (4) industry investment in new
capacity. The EPA and DOE are to recommend to Congress
potential changes to harmonize fuels requirements nationally
and reduce the number of specialty fuels. The report
recommendations are required to take into account the need to
provide advance notice of required modifications to refinery
and fuel distribution systems in order to ensure an adequate
supply of motor vehicle fuel in all States.
Legislative History
S. 606 was introduced by Senator Thune on March 11, 2005,
and was referred to the Committee on Environment and Public
Works. The committee met on March 16, 2005, to consider the
bill. The bill, as amended, was ordered reported on March 16,
2005.
During the 108th Congress, the committee considered a
similar bill, S. 791 introduced by Senator Inhofe. The
committee favorably reported the bill, as amended in a business
meeting on April 9, 2003. During the 107th Congress, the
committee favorably reported a related bill, S. 950, the
Reformulated Fuels Act, which did not pass the Senate.
Hearings
There have been no hearings held on S. 606 during the 109th
Congress.
On March 20, 2003, the Subcommittee on Clean Air, Climate
Change, and Nuclear Safety held a non-legislative hearing on
alternative fuels and fuel additives. The witnesses providing
testimony were Hon. Jeffrey R. Holmstead, Assistant
Administrator for Air and Radiation, U.S. Environmental
Protection Agency; Hon. David Garman, Assistant Secretary for
Renewable Energy, U.S. Department of Energy; Mary Hutzler,
Director, Office of Integrated Analysis and Forecasting, Energy
Information Administration; Fred Yoder, President, National
Corn Growers Association; Dr. Edward Murphy, Downstream General
Manager, American Petroleum Institute; Robert Slaughter,
President, National Petrochemical and Refiners Association;
Scott Segal, Partner, Bracewell and Patterson, L.L.P.; Rich
Wagman, First Vice Chairman of ARTBA, President of G.A. and
F.C. Wagman, York, Pennsylvania, on behalf of the American Road
and Transportation Builders Association; A. Blakeman Early,
Consultant, American Lung Association; Paul J. Granger, P.E.,
Superintendent, Plainview Water District, Plainview, New York;
and Craig Perkins, Director, Environment and Public Works
Management, Santa Monica, California.
During the 105th through the 107th Congresses, the
committee held hearings on the use of oxygenated fuels under
the requirements of the Clean Air Act.
On December 9, 1997, the Committee on Environment and
Public Works held a field hearing in Sacramento, CA on the
presence of MTBE in the nation's water supply. Testimony was
given by Nancy J. Balter, Principal, Center for Environmental
Health and Human Toxicology, and former Associate Professor of
pharmacology, Georgetown University Medical Center; Nachman
Brautbar, Professor of clinical medicine, University of
Southern California School of Medicine; Cynthia Dougherty,
Director, Office of Groundwater and Drinking Water,
Environmental Protection Agency; Stephen K. Hall, Executive
Director, Association of California Water Agencies; The
Honorable Tom Hayden, California State Senator; The Honorable
Richard Mountjoy, California State Senator; Gary Patton,
Counsel, The Planning and Conservation League; Craig Perkins,
Director of Environment and Public Works Management, city of
Santa Monica, California; Peter M. Rooney, Secretary,
California State Environmental Protection Agency; David Spath,
Chief, Drinking Water and Environmental Management Division,
California State Environmental Protection Agency; and John
Zogorski, Chief of National Synthesis on Volatile Organic
Compounds and MTBE, U.S. Geological Survey.
On September 16, 1998, the Committee on Environment and
Public Works held a hearing on S. 1576, a bill to amend the
Clean Air Act to permit the exclusive application of California
State regulations regarding reformulated gasoline in certain
areas within the State. Testimony was given by The Honorable
Brian Bilbray, U.S. Representative from the State of
California; John D. Dunlap, III, Chairman, California Air
Resources Board; Douglas A. Durante, Executive Director, Clean
Fuels Development Coalition; The Honorable Dianne Feinstein,
U.S. Senator from the State of California; Daniel S. Greenbaum,
President, Health Effects Institute; Al Jessel, Senior Fuels
Specialist, Chevron Products Company; and Ned Sullivan,
Commissioner, Maine Department of Environmental Conservation.
On October 5, 1999, the Subcommittee on Clean Air,
Wetlands, Private Property and Nuclear Safety of the Committee
on Environment and Public Works held a hearing on the Blue
Ribbon Panel findings on MTBE. Testimony was given by Robert H.
Campbell, Chairman and Chief Executive Officer, Sunoco, Inc.;
The Honorable Jake Garn, Vice Chairman, Huntsman Corporation;
Daniel S. Greenbaum, President, Health Effects Institute; and
Michael P. Kenny, Executive Officer, California Air Resources
Board.
On June 14, 2000, the Subcommittee on Clean Air, Wetlands,
Private Property and Nuclear Safety of the Committee on
Environment and Public Works held a hearing on the
environmental benefits and impacts of ethanol under the Clean
Air Act. Testimony was given by Dan Greenbaum, President,
Health Effects Institute; Blake Early, Environmental
Consultant, American Lung Association; Michael Graboski,
Director, Colorado Institute for Fuels and High Altitude Engine
Research, Colorado Department of Chemical Engineering, Colorado
School of Mines; Bob Slaughter, Director, National
Petrochemical & Refiners Association; Jack Huggins, Vice
President, Williams Energy Services; Jason Grumet, Executive
Director, Northeast States for Coordinated Air Use Management;
Stephen Gatto, President and Chief Executive Officer, BC
International; Gordon Proctor, Director, Ohio Department of
Transportation; The Honorable Charles Grassley, United States
Senator from the State of Iowa; The Honorable Tom Harkin,
United States Senator from the State of Iowa; The Honorable
Richard Durbin, United States Senator from the State of
Illinois.
On April 27, 2001, at the Media Center, Salem High School,
Salem, NH, the committee received testimony on the use of the
gasoline additive methyl tertiary butyl ether (MTBE), from
Christina Miller, homeowner, Derry NH; Hon. Arthur Klemm, New
Hampshire State Senator, Windham, NH; Robert Varney,
Commissioner, New Hampshire Department of Environmental
Services, Concord, NH; Nancy Kinner, Professor of Civil
Engineering, University of New Hampshire, Durham, NH; William
Holmberg, Biofuel Refiner, Bow, NH; Patty Aho, Executive
Director, Maine Petroleum Association, Augusta, ME.
Rollcall Votes
The Committee on Environment and Public Works met to
consider S. 606 on March 16, 2005. During consideration of the
bill, a manager's amendment offered by Senator Inhofe was
agreed to by Unanimous Consent. The bill was ordered reported
to the Senate, as amended, by voice vote. Senators Jeffords,
Boxer, Clinton, Lautenberg, and Warner were recorded as voting
no.
Regulatory Impact Statement
In compliance with section 11(b) of rule XXVI of the
Standing Rules of the Senate, the committee makes evaluation of
the regulatory impact of the reported bill.
The regulatory authority granted by this bill is structured
to streamline and make flexible the imposition of any new
requirements.
Section 101 requires the Administrator of the EPA to issue
regulations to establish a renewable fuel content requirement
applicable to all refineries, blenders, distributors and
importers of gasoline sold or introduced into commerce in the
United States, except in Alaska or Hawaii.
Under Section 203, no regulatory action is required to
affect the phaseout of MTBE, though the Administrator will need
to issue regulations to implement and enforce this phaseout.
The Administrator's existing authority to limit the use of
fuels or fuel additives is expanded by the bill to allow
consideration of water pollution effects.
Section 204 requires EPA to promulgate regulations to
establish new performance standards for toxic emissions within
270 days of enactment. In the event that refiners' toxics
reduction performance does not achieve at least the 1999-2000
average in a region, EPA must promulgate revised regulations to
assure such performance. Compliance with the performance
standards is managed through existing regulatory structures
under Section 211(k) of the CAA.
Also in section 204, EPA must revise the current RFG
regulations to ensure that northern RFG gasoline will meet the
more stringent VOC requirements of southern RFG.
The provisions in Section 207 regarding additional opt-in
areas rely entirely on existing authority and regulatory
structures for revisions and approvals of SIPs.
Mandates Assessment
In compliance with the Unfunded Mandates Reform Act of 1995
(Public Law 104-4), the committee finds that S. 606 would
impose no significant Federal intergovernmental unfunded
mandates on State, local, or tribal governments.
Cost of Legislation
Section 403 of the Congressional Budget and Impoundment
Control Act requires that a statement of the cost of the
reported bill, prepared by the Congressional Budget Office, be
included in the report. That statement follows:
----------
S. 606, Reliable Fuels Act, As ordered reported by the Senate Committee
on Environment and Public Works on March 16, 2005
Summary
Under S. 606, methyl tertiary butyl ether (known as MTBE),
a widely used motor fuel additive, would be banned 4 years
after enactment of the bill--except individual States could
choose to continue to allow the use of MTBE by notifying the
administrator of the Environmental Protection Agency (EPA). The
bill would eliminate a requirement under current law for motor
fuel to contain oxygenates, but would require that all motor
fuels sold by a refiner, blender, or importer contain specified
amounts of renewable fuel. CBO expects that this renewable fuel
standard would largely be met by adding ethanol to gasoline. S.
606 also would authorize funding for several grant programs to
support research and development of renewable fuels technology.
The bill also would authorize funding for rulemaking, studies,
and reports to the Congress related to the renewable fuels
program.
The bill's requirement to use renewable fuels would reduce
spending on farm support programs and also would have an
insignificant effect on motor fuels tax receipts. CBO estimates
that enacting S. 606 would reduce direct spending by about $1.5
billion over the 2011-2015 period by increasing the demand for
certain agricultural commodities.
Finally, we estimate that implementing S. 606 would cost
about $340 million in 2006 and $1.5 billion over the 2006-2010
period, subject to appropriation of the necessary amounts. Most
of that spending would be for grants to producers of MTBE (to
convert their facilities to produce other fuel additives), and
to producers of biomass ethanol (derived from plants, grasses,
fibers, and certain waste sources). The bill would authorize
the appropriation of $1.15 billion for those grants, as well as
authorizing funding for other related programs.
S. 606 contains an intergovernmental mandate as defined in
the Unfunded Mandates Reform Act (UMRA) because it would
preempt State liability laws and prevent State and local
governments from seeking damages from producers of gasoline
that contains renewable fuel. CBO expects that the costs to
comply with this mandate would not be significant over the next
5 years; therefore, the threshold established in UMRA ($62
million in 2005, adjusted annually for inflation) would not be
exceeded.
S. 606 contains several private-sector mandates as defined
in UMRA. While CBO cannot estimate the aggregate cost of all
the mandates contained in the bill, we anticipate that the
costs would not be large. Therefore, CBO estimates that the
total cost of the private-sector mandates would be below the
annual threshold established in UMRA ($123 million in 2005,
adjusted annually for inflation) for the first 5 years that the
mandates are in effect.
Estimated Cost to the Federal Government
The estimated budgetary impact of S. 606 is shown in Table
1. The costs of this legislation fall within budget functions
270 (energy), 300 (natural resources and environment), 350
(agriculture), 370 (commerce and housing credit), and 950
(undistributed offsetting receipts).
Basis of Estimate
For this estimate, CBO assumes that the bill will be
enacted by the end of fiscal year 2005, that the full amounts
authorized will be appropriated for each fiscal year, and that
spending will follow historical rates for ongoing or similar
activities.
Spending Subject to Appropriation
S. 606 contains several provisions that specify amounts
authorized to be appropriated for researching methods to
improve the production of renewable fuels and amounts to
correct environmental contamination caused by MTBE. The bill
also would authorize unspecified amounts to be appropriated for
the promulgation of new rules, studies, and reports to the
Congress associated with the new renewable fuels standard that
would be established under the bill. Assuming appropriation of
the specified and estimated amounts, CBO estimates that
implementing these provisions would cost about $340 million in
2006 and $1.5 billion over the 2006-2010 period. Major
components of this estimate are described below.
TABLE 1. ESTIMATED BUDGETARY IMPACT OF S. 606
By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Grants to MTBE Producers.......................
Authorization Level........................ 250 250 250 0 0
Estimated Outlays.......................... 100 213 250 150 38
Grants to Producers of Cellulosic Biomass
Ethanol.......................................
Authorization Level........................ 400 0 0 0 0
Estimated Outlays.......................... 180 140 60 20 0
Center for Biomass-Based Energy................
Authorization Level........................ 4 4 0 0 0
Estimated Outlays.......................... 3 4 1 0 0
Grants for Renewable Fuel Production...........
Authorization Level........................ 25 25 25 25 25
Estimated Outlays.......................... 11 20 24 25 25
LUST Program...................................
Authorization Level........................ 30 30 30 30 0
Estimated Outlays.......................... 8 18 26 29 23
Loan Guarantees................................
Estimated Authorization Level.............. 30 0 40 0 40
Estimated Outlays.......................... 30 0 40 0 40
Clean Air Act Provisions.......................
Estimated Authorization Level.............. 11 13 12 11 11
Estimated Outlays.......................... 11 13 12 11 11
Total Proposed Changes.....................
Estimated Authorization Level.......... 750 322 357 66 76
Estimate Outlays....................... 343 408 413 235 137
CHANGES IN DIRECT SPENDING\1\
Estimated Budget Authority..................... 0 0 0 0 0
Estimated Outlays.............................. 0 0 0 0 0
CHANGES IN REVENUES
Estimated Revenues............................. 0 * * * *
----------------------------------------------------------------------------------------------------------------
NOTES: LUST = Leaking Underground Storage Tanks; * = less than $500,000.
\1\CBO estimates that the bill would have no direct spending impact over the 2006-2010 period but would reduce
direct spending by $1.5 billion over the 2011-2015 period (See table 2).
Grants to MTBE Producers. S. 606 would authorize the
appropriation of $750 million to the Department of Energy (DOE)
over the 2006-2008 period for grants to assist producers of
MTBE to convert facilities to produce alternative fuel
additives instead of MTBE.
Grants to Producers of Cellulosic Biomass Ethanol. S. 606
would authorize the appropriation of $400 million to DOE in
2006 for grants to producers of cellulosic biomass ethanol
(ethanol derived from such materials as plants, grasses,
fibers, municipal solid waste, and wood residues) to build
production facilities.
Center for Biomass-Based Energy. This legislation would
authorize the appropriation of $8 million over the 2006-2007
period to establish a resource center at the University of
Mississippi and the University of Oklahoma for the purpose of
developing new methods to produce ethanol.
Research and Development Grants for Renewable Fuel
Production. S. 606 would authorize the appropriation of $125
million to EPA over the 2006-2010 period for grants to certain
academic institutions and consortia (consisting of academic
institutions, industry, State government agencies, or local
government agencies) for research and development related to
technologies for the production of renewable fuel.
LUST Program. This legislation would authorize the
appropriation of $120 million over the 2006-2009 period from
EPA's Leaking Underground Storage Tank (LUST) Trust Fund. This
funding would be used for grants to States to correct
contamination caused by MTBE and for enforcement and inspection
activities related to LUST sites.
Loan Guarantees. S. 606 would authorize DOE to issue loan
guarantees to help finance the construction of facilities to
produce fuel ethanol from agricultural residue or municipal
solid waste. The development of such facilities poses some risk
mainly because the technology that would be used to process
ethanol from such sources is new and is not well-proven.
For this estimate, we expect that such facilities would be
debt-financed and sponsors would recover costs through the sale
of ethanol. Prices for ethanol have a history of fluctuating
widely and the likelihood of future fluctuations could
contribute additional credit risk for such a project. Moreover,
the cash-flow for these projects also would rely heavily on the
cost of purchasing feedstock or (for solid waste facilities) on
revenues from ``tipping fees'' (i.e., those fees charged by the
plant to accept municipal solid waste feedstock). According to
DOE, a plant's reliance on feedstock from these sources would
increase a project's credit risk because prices for feedstock
can become competitive if demand for such products increases
and tipping fee revenue may also fluctuate.
Under credit reform procedures, funds must be appropriated
in advance to cover the subsidy cost of loan guarantees,
measured on a present-value basis. Because of the significant
level of risk associated with these types of projects, the
costs of subsidizing such loan guarantees could vary widely. At
worst, the government could absorb all of the risk, effectively
converting the loan guarantees into grants. S. 606 would
authorize DOE to issue loan guarantees limited to $250 million
per project for a total of four projects (i.e., up to $1
billion worth of guarantees could be made). Under this
legislation, an applicant for a loan guarantee would have to be
currently operating an existing facility that produces at least
50,000 gallons of ethanol per year.
CBO estimates that, over the next 5 years, DOE would
probably provide loan guarantees for three projects, each with
a total construction cost of about $250 million. Because the
bill also would require applicants to contribute at least 20
percent of the project's total cost, CBO estimates that the
value of each loan guarantee would be about $200 million. In
addition, based on information from DOE, CBO assumes that the
department would seek projects with a financial outlook similar
to those of bonds rated B- or better by companies such as
Standard and Poors and Moodys. Projects with this rating
typically have a cumulative default risk of over 40 percent.
Under those assumptions, CBO estimates that loans guaranteed
under the bill would be likely to have a subsidy rate between
15 percent and 20 percent and would cost $110 million over the
2006-2010 period.
Motor Fuels and Clean Air Act Provisions. This legislation
would require EPA to promulgate new rules, prepare studies for
the Congress, and implement new programs related to the
renewable content of motor fuels and air pollution resulting
from the use of motor fuels. CBO estimates that implementing
these provisions in S. 606 would cost $10 million in 2006 and
$58 million over the 2006-2010 period. Of the $58 million, more
than half would be for EPA's costs to enforce motor fuel
standards. Specifically, the bill would require that EPA
promulgate rules that require motor fuels sold by a refiner,
blender, or importer contain specified amounts of renewable
fuels. Under the bill, by 2012, gasoline sold to U.S. consumers
would be required to include, on an annual average basis, 6
billion gallons of renewable fuel. (In 2004, 140 billion
gallons of gasoline were sold in the United States.)
Additionally, the bill would require the EPA to conduct
annual surveys on market shares of various renewable fuels
starting in December 2006. Such a survey could cost as much as
$4 million annually if EPA were to undertake a survey of all
retail gasoline sales. This legislation also would require EPA,
at the request of a State, to enforce any State-adopted
regulations concerning fuels requirements. State fuels programs
can vary. Some programs are seasonal, while others are more
complex where many fuel parameters are regulated. Specifically,
EPA staff would be required to travel to the affected cities,
take samples, review records, and conduct audits of refiners
and importers. Based on information from EPA, CBO estimates
that implementing this provision would require the equivalent
of an additional 22 staff, funding for their travel expenses,
and funding associated with laboratory sampling and technical
analysis, resulting in a cost of $5 million annually and $25
million over the next 5 years, subject to appropriation of the
necessary funds.
S. 606 also includes several other provisions that would
require new studies, reports to the Congress, and activities
related to banning the use of MTBE in motor fuels to be
prepared by DOE and the Federal Trade Commission. CBO estimates
that such activities would cost about $3 million over the 2006-
2010 period.
Direct Spending and Revenues
CBO estimates that enacting S. 606 would lower direct
spending by about $1.5 billion over the next 10 years and have
an insignificant effect on revenues over the same period. The
bill's impact on direct spending and revenues over the 2006-
2015 period is shown in Table 2.
TABLE 2. ESTIMATED IMPACT OF S. 606 ON DIRECT SPENDING AND REVENUES
By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING AND
REVENUES
Estimated Budget Authority...... 0 0 0 0 0 -115 -250 -340 -375 -385
Estimated Outlays............... 0 0 0 0 0 -115 -250 -340 -375 -385
Estimated Revenues.............. 0 * * * * * * * * *
----------------------------------------------------------------------------------------------------------------
NOTE: * = less than $500,000.
Renewable Fuels Requirement and Agriculture Support
Programs. Section 101 of the bill would require that motor
fuels sold by a refiner, blender, or importer contain specified
amounts of renewable fuel. The required volume of renewable
fuel would start at 3.8 billion gallons in 2006 and escalate to
6 billion gallons for 2012 and increase at the growth in
gasoline consumption. The bill also would amend the Clean Air
Act to eliminate the requirement for gasoline that is sold in
certain regions of the country to contain 2 percent oxygen by
weight. This provision might lower demand for gasoline
oxygenates (including ethanol), particularly in the first few
years of the period because the mandated use of renewable fuels
is below CBO's baseline for the use of ethanol.
However, the bill also provides for the generation of
credits toward meeting the renewable fuel requirement, which
can be used to satisfy future years' requirements. Because of
the ability of a refiner, blender, or importer to save ethanol-
use credits generated in 1 year to satisfy requirements in a
future year, CBO does not expect that the use of renewable
fuels would be significantly affected until 2011 when the
bill's renewable fuel requirement would exceed the CBO baseline
for such fuels (including accumulated credits).
CBO expects that most of the fuel produced to meet the
requirements under the act would be corn-based ethanol. Because
ethanol is primarily derived from corn, demand for corn would
rise with the requirement to use more ethanol. CBO expects that
higher prices for corn during the 2011-2015 period would
result. Accordingly, the costs of Federal programs to support
farm prices and provide income support would fall over the
2011-2015 period. CBO estimates that spending for farm price
and income supports would decline by about $1.5 billion over
the 2011-2015 period.
Renewable Fuels Requirement and Revenues. Because ethanol-
blended fuels are taxed at a lower rate than gasoline, receipts
from motor fuels would change when ethanol use changes. CBO
estimates, however, that effects on revenues from this bill
would be insignificant for two main reasons. First, effects on
ethanol use would be insignificant before 2011 because the bill
provides for the generation of credits toward meeting the
renewable fuel requirement, which can be used to satisfy future
years' requirements. Second, although ethanol use would
increase significantly under the bill after 2010, the special
tax treatment of ethanol fuels expires at the end of calendar
year 2010, so changes in ethanol use would not significantly
affect revenues after that point.
Enacting this bill could also increase receipts from new
civil penalties against violators of the renewable fuels
program established under this legislation. CBO estimates that
any such increase in civil penalties would not be significant.
Estimated Impact on State, Local, and Tribal Governments
S. 606 would shield manufacturers of gasoline from
liability claims based on the renewable content of their fuel.
This provision would limit the application of State law and
prohibit State and local governments from seeking damages from
producers of gasoline that contains renewable fuel. That
provision constitutes an intergovernmental mandate as defined
in UMRA. Because there are currently no such lawsuits pending
in the courts, CBO estimates that the mandate would impose no
duty on State or local governments that would result in
significant additional spending (or forgone collections) over
the next 5 years. Therefore, the threshold established in UMRA
($62 million in 2005, adjusted annually for inflation) would
not be exceeded.
Other provisions of the bill contain no intergovernmental
mandates and would impose no direct costs on State, local, or
tribal governments. States with EPA approval to enforce clean
air standards for motor fuels would have to comply with several
new requirements, but they would do so voluntarily. In general,
the bill would benefit States by authorizing grants and amounts
from the LUST Trust Fund for a variety of activities.
Estimated Impact on the Private Sector
S. 606 contains several private-sector mandates as defined
in the Unfunded Mandates Reform Act. While CBO cannot estimate
the aggregate cost of all the mandates contained in the bill,
we anticipate that such costs would not be large. Therefore,
CBO estimates that the total cost of the private-sector
mandates would be below the annual threshold established in
UMRA ($123 million in 2005, adjusted annually for inflation)
for the first 5 years that the mandates are in effect.
Renewable Fuel Program
Renewable Fuel Standard. Section 101 would require domestic
refiners, blenders, and importers of gasoline to ensure that
gasoline sold or dispensed to consumers in the contiguous
United States contains a minimum volume of renewable fuels. The
required volume of renewable fuel would start at 3.8 billion
gallons in 2006 and increase to 6.0 billion gallons by 2012.
Section 101 also would allow refineries, blenders, and
importers to accumulate and trade credits for quantities of
renewable fuels. Individual refineries, blenders, or importers
may experience cost increases, should they need to purchase
credits to meet individual compliance provisions. In the first
5 years that the renewable fuel standard would be in effect,
the motor fuels industry would be able to meet the standard
without increasing renewable fuel use. Thus, CBO expects the
net cost for the industry as a whole to be zero in the first 5
years the standard is in effect.
Seasonal Variation in Renewable Fuel Use. Section 101 would
direct the Energy Information Administration (EIA) to determine
if there are excessive seasonal variations in the amount of
renewable fuel blended into gasoline. Refiners might have an
incentive to use more of the annual requirement for renewable
fuel (mostly ethanol) in the winter months, when evaporative
emissions from gasoline are less of a concern. Sharp seasonal
changes in the demand for ethanol could lead to large swings in
ethanol and gasoline prices. If EIA determines that there are
excessive seasonal fluctuations, EPA would impose regulations
requiring that at least 35 percent of the renewable fuel
standard be blended into gasoline in summer months and another
35 percent be blended in winter months. At this time EPA does
not have any information on excessive seasonal variation in
renewable fuel use, but expects that such requirements will not
be likely. In the event that a determination by EIA triggers
additional EPA regulations, the duty to comply with those
regulations would constitute a private-sector mandate.
Safe Harbor. The renewable fuel standard required by the
bill would substantially increase the amount of renewable fuel
that is blended into gasoline. Section 101 would shield motor
fuel manufacturers and other persons from liability for a
defect in design or manufacture of a motor vehicle fuel
containing renewable fuel. That protection would be in effect
as long as the fuel is in compliance with other applicable
Federal requirements. The provision would impose a private-
sector mandate by limiting existing rights to seek compensation
under current law, but CBO cannot determine the cost of this
mandate. Effective on the date of enactment, the provision
would have no impact on existing claims or court determinations
or settlements. Currently, there are no lawsuits of this
nature.
Eliminate the Ethanol Waiver. Section 101 would authorize
States to apply for an exclusion from a waiver that under
current law allows gasoline blended with ethanol to have higher
evaporative properties than gasoline blended with other fuel
additives. Gasoline blends containing ethanol evaporate more
readily at a given temperature, contributing to smog formation.
To the extent that gasoline blended with ethanol is sold in a
State requesting an exclusion, the exclusion would increase the
cost of an existing private-sector mandate on refiners who sell
in the State. According to industry sources, it is unlikely
that States using ethanol would request an exclusion from the
waiver. In the event that such a State did request an
exclusion, CBO estimates the increased cost to refiners would
be small.
Recordkeeping and Reporting Requirements. Section 102 would
require the EPA to collect data and issue a report on the
amount of renewable fuel blending. The EPA may require
refiners, blenders, and importers to keep records or make
reports that are necessary for the EPA's survey of renewable
fuel blending. In the event that the EPA does issue new
recordkeeping or reporting requirements for refiners, blenders,
and importers, that would constitute a new private-sector
mandate. The bill, however, would require that any new
recordkeeping or reporting requirements be folded into existing
requirements. CBO expects that the cost for any new
recordkeeping requirements would be small.
MTBE Ban
Under the Clean Air Act Amendments of 1990, areas with poor
air quality are required to add chemicals called ``oxygenates''
to gasoline as a means of reducing certain air pollution
emissions. One of the most commonly used oxygenates is methyl
tertiary butyl ether. Roughly one-third of the MTBE used in the
United States is supplied to refiners by merchant producers and
the rest is produced by the refiners themselves or imported. In
recent years, concerns have been raised about the adverse
effects on groundwater supplies from MTBE that leaks from
underground tanks, and 19 States have passed laws to either ban
or reduce the local use of MTBE.
Section 203 would ban the use of MTBE in gasoline within 4
years of the bill's enactment. At the same time, the provision
would allow any State to authorize MTBE use by notifying the
EPA. A nationwide ban with States opting to continue use of
MTBE may not be fundamentally different from the current
situation in which States impose their own local bans.
Therefore, it is possible that MTBE use would not be
significantly affected by the new ban. Moreover, CBO
anticipates that the renewable fuels standard established in
section 101 would, on its own, greatly reduce--if not
eliminate--incentives to use MTBE.
CBO cannot determine in which States, if any, the Federal
MTBE ban would be more constraining than the renewable fuel
standard and, therefore, cannot determine the cost of the
mandate. In States where the Federal ban would be more
constraining, the ban could impose costs on refiners and
merchant producers. Gasoline refiners would need to replace
MTBE with higher-cost blendstocks, and merchant producers would
likely convert their operations to the production of less-
profitable blendstocks, such as alkylates or iso-octane. The
bill would authorize Federal transition grants--amounting to
$750 million over the 2006-2008 period--to merchant producers
to convert their facilities.
Other Fuel Requirements
Anti-Backsliding Baseline. Section 204 would direct the EPA
to establish a more stringent baseline for toxic emissions from
reformulated gasoline. The current baseline, which became
effective in 2002, is refinery specific and is based on average
1998 through 2000 reformulated gasoline parameter values. The
bill would establish a baseline that averages parameter values
only from calendar years 1999 and 2000, which would require
reformulated gasoline to be slightly cleaner. According to
industry sources, it is unclear that the more-stringent
baseline would increase costs significantly. CBO expects that
the cost of this mandate would be small.
VOC Region Consolidation. Section 204 would consolidate the
regional regulations that limit the emissions of volatile
organic compounds (VOCs) from gasoline, by applying the more-
stringent standards for gasoline sold in the southern United
States to gasoline sold in the northern United States. Meeting
the more-stringent standards would impose a private-sector
mandate. According to industry experts, the difference in the
stringency of the two standards is small, and therefore, the
mandate is not likely to increase industry costs.
Increased Environmental and Public Health Testing. Section
205 would require fuel and fuel additive manufacturers to test
their products regularly for any environmental or public health
effects, as part of the registration process with the EPA.
Under current law, such testing occurs at the discretion of the
EPA Administrator. The specific test items listed in the
provision commonly are included in industry testing, and
neither the EPA nor the industry expects the frequency of
testing to change. CBO does not expect the mandate to impose
any additional costs on manufacturers of fuels or fuel
additives.
State Opt-in to Reformulated Gasoline (RFG) Program.
Section 207 would authorize States in the ozone transport
region (several States in the Northeast) to ask EPA to apply
the more-stringent air emissions standards of the RFG program
in areas that are already in attainment of air quality
standards. Industry experts indicate that few of the States in
the ozone transport region currently using conventional
gasoline would want to opt in to the RFG program under this
provision. Furthermore, should a State in the region choose to
opt in, the mandate would impose a very small cost on
refineries.
Previous CBO Estimate
On April 19, 2005, CBO transmitted a cost estimate for H.R.
6, the Energy Policy Act of 2005, as introduced on April 18,
2005. H.R. 6 also would require the use of renewable fuel in
motor fuel; however, CBO estimated that requirement would not
have a significant Federal budget impact because the required
amount would be lower than the amount specified in S. 606. Both
bills also contain an intergovernmental mandate as defined in
UMRA by shielding manufacturers of gasoline from certain
liability claims. Because the mandate in H.R. 6 is much broader
and would shield them from liability claims (including many
pending claims) for the manufacture of MTBE, CBO estimated that
bill's mandate costs would be significantly higher than the
mandate costs in S. 606.
Estimate Prepared By: Federal Spending: Susanne S. Mehlman,
EPA and Energy Provisions; David Hull, Agriculture Subsidies.
Federal Revenues: Laura Hanlon. Impact on State, Local, and
Tribal Governments: Theresa Gullo. Impact on the Private
Sector: Selena Caldera.
Estimate Approved By: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis and G. Thomas Woodward, Assistant
Director for Tax Analysis.
MINORITY VIEWS OF SENATORS JEFFORDS, BOXER, LAUTENBERG, AND CLINTON
We write separately here on S. 606, the Reliable Fuels Act
of 2005, to underscore the importance of ending methyl tertiary
butyl ether (MTBE) use, to explain why the committee did not
include liability exemptions for MTBE contamination, and to
urge the full Senate to reject any measure that would force
taxpayers to pay for MTBE cleanup rather than responsible
parties.
Further, we have grave concerns about the significant
likelihood that S. 606 would permit refiners to backslide on
their historical improvements in toxics emissions reduction
performance. This legislation reported by the committee, with
provisions on leaking underground storage tanks that have not
been updated since 2001, also fails to reflect the important
progress the committee has made more recently in dealing
comprehensively with our nation's enormous problem of leaking
underground storage tanks.
MTBE Ban and Manufacturers' Liability
MTBE is classified as a possible human carcinogen, and when
leaked into water even in small amounts causes water to take on
the taste and smell of turpentine, rendering it undrinkable.
MTBE leaking from underground storage tanks, recreational water
craft and abandoned automobiles has lead to growing detections
of MTBE in drinking water. In fact, the U.S. Geological Survey
has estimated that MTBE may contaminate roughly one-third of
drinking water supplies nationwide. MTBE poses a different
threat to drinking water relative to the other harmful
constituents of gasoline because MTBE is more soluble, more
mobile and degrades slower than those other constituents.
Oil companies began adding MTBE to gasoline at least as
early as 1979, using 215,000 tons in that year alone. By 1986,
oil companies were adding 54,000 barrels of MTBE to gasoline
each day. By 1991, 1 year before the Clean Air Act (CAA)
oxygenate requirement went into effect, oil companies were
using more than 100,000 barrels of MTBE per day. By 1997, the
volume of MTBE production was the second highest of any
chemical in the United States. These basic facts underscore two
extremely important points about the committee's consideration
of solutions to the MTBE contamination problem.
First, proposals that simply remove the CAA oxygenate
requirement from the law without affirmatively banning MTBE
will simply not end MTBE use. As noted above, MTBE was used for
octane enhancement long before the CAA Amendments of 1990.
There is no reason to believe that it would not continued to be
used if the CAA oxygenate requirement were removed from the
law, but no ban put in place. In another example, in May 1999,
two oil companies in the San Francisco area were found to have
been adding substantial volumes of MTBE to gasoline. At the
time, that area complied with air standards and therefore the
CAA didn't require the addition of an oxygenate. Again,
companies were adding MTBE to gasoline for reasons wholly
independent of the CAA.
Second, these facts belie the oil companies' arguments that
Congress made oil companies use MTBE, and that therefore
lawsuits against oil companies should be terminated by Congress
and taxpayers should pay to clean up MTBE contamination. MTBE
was in use well before the passage of the CAA Amendments. The
CAA does not mandate the use of MTBE. And the fact that there
was any oxygenate requirement in those amendments at all was
due, in part, to oil industry lobbying.
For example, in 1989 testimony before the Senate Committee
on Environment and Public Works, an ARCO official strongly
recommended that the committee include a mandate for MTBE in
the Clean Air Act Amendments of 1990, touting MTBE's benefits
but not disclosing its devastating impact on drinking water.
Hearings before the Subcommittee on Environmental Protection of
the Committee on Environment and Public Works on S. 1630, S.
Hrg. 101-331 at 458 (Sept. 28, 1989). Despite such lobbying,
Congress did not adopt a MTBE mandate, but rather prescribed
that reformulated gasoline contain an oxygenate without
specifying a particular product. Courts have specifically ruled
on the question of whether Congress mandated MTBE and have
determined that MTBE was not mandated (Oxygenated Fuels
Association Inc. v. Davis, 33 F.3d 655 (9th Cir. 2003)).
At the time of such lobbying, oil companies knew they were
recommending a product that would have a devastating impact on
drinking water. Indeed, where courts have heard oil industry
claims that they should not be held liable for MTBE
contaminated drinking water supplies, they have not only
rejected those claims but have found that companies acted with
malice in not disclosing the risks of using MTBE. MTBE
contamination is not like ordinary gasoline contamination. MTBE
moves through water quickly and does not adhere to the soil.
Very small amounts have been known to contaminate groundwater
and migrate farther and faster than other hydrocarbons.
In fact, over a dozen communities have sued oil companies
for knowingly introducing a defective product into the
marketplace. Several oil companies recently settled one such
suit, South Tahoe Public Utility District v. Atlantic Richfield
Company, et al., for $60 million. In South Tahoe, it was
determined that oil companies were guilty of irresponsibly
manufacturing and distributing MTBE because these companies
knew it would contaminate drinking water.
It was also found by clear and convincing evidence that two
companies had acted with `malice' by failing to warn of the
environmental dangers of MTBE.
Together, documents and sworn testimony in South Tahoe
demonstrated that several oil companies knew as early as 1980
that MTBE posed a significant threat to the nation's drinking
water, that they promoted MTBE to the State and Federal
Governments without disclosing internal information
demonstrating that threat, and that they attempted to discredit
public scientific studies that began to demonstrate that
threat.
Documents and sworn testimony in South Tahoe also revealed
that oil company officials, showing a callous disregard for our
environment, even gave MTBE telling nicknames such as `Most
Things Biodegrade Easier', `Menace Threatening our Environment'
and `Major Threat to Better Earnings.' Further the case also
revealed that Shell and ARCO, the first refiners to add MTBE to
gasoline, estimated that 20 percent of all underground storage
tanks--tanks likely containing MTBE--were leaking. Several oil
companies were shown to have both developed and promoted the
concept of using reformulated gasoline to reduce air emissions.
For example, ARCO officials testified that `EPA did not
initiate . . . reformulated gasoline' and that `[T]he oil
industry brought [reformulated gasoline] forward as an
alternative to what the EPA had initially proposed.' Documents
and sworn testimony also revealed that in 1987 an ARCO
representative testified before the Colorado Air Quality
Control Commission that MTBE would aid in reducing air
emissions but did not warn of the drinking water contamination
threat. This representative testified that he also assisted
Arizona and Nevada develop oxygenate programs that relied upon
MTBE without disclosing the danger.
In 1986, the Maine Department of Environmental Protection
issued a scientific report describing the threat posed by MTBE.
Documents and sworn testimony in South Tahoe revealed a
concerted strategy by the oil industry to discredit the article
at the same time that internal industry documents admitted the
soundness of the Maine warning. When the Maine paper prompted
EPA to issue a notice to oil companies for more information
regarding MTBE, ARCO responded in 1987 that there was little
information to suggest MTBE was a threat despite internal ARCO
documents showing the contrary.
As South Tahoe demonstrates, terminating the right of
communities to seek legal redress against oil companies for
MTBE contamination would be a grave injustice. It has not been
embraced by the committee, it should not be embraced by the
Senate and it should not become law.
Just as it is important to clarify oil industry
responsibility for MTBE contamination, it is also important to
clarify a number of mischaracterizations that appear in the
majority views on the MTBE transition program. S. 606 provides
for limited transition assistance to producers of MTBE to
mitigate fuel supply problems, such as shortages or
disruptions, that might occur as a result of the elimination of
the widespread use of that fuel additive by this legislation.
The findings section of S. 606 (section 203) notes that it is
appropriate for the Congress to provide limited transition
assistance in this fashion. Those findings were arrived at
after much discussion and debate among the various affected
parties and were first incorporated into legislation as part of
H.R. 4, as passed by the Senate in 2002, and reintroduced in
the 108th Congress (S. 385).
The majority views attempt to incorrectly convey that such
assistance is premised on two additional factors that appear
nowhere in the legislation, that cannot be logically inferred
from the findings in S. 606, and that do not reflect a
committee consensus. These incorrect inferences are that,
first, the government bears `great' responsibility for losses
the MTBE producers experience as a result of Congress' action
to phaseout MTBE; and, second, that a failure to provide
transition assistance in light of the ban will discourage
manufacturers from supplying the market with additives that
will meet energy and environmental goals.
The findings state that the fuel industry responded to the
fuel oxygenate standard established in the CAA of 1990 by
investing in MTBE production capacity. As noted above, that
standard did not require or mandate that MTBE be produced or
that only MTBE could satisfy such a standard. Again, as noted
above, the oil industry itself lobbied for the oxygenate
requirement and wanted to use MTBE to meet it. Therefore,
Congress cannot be held responsible for voluntary industry
decisions to make or not to make investments in MTBE.
Given that Congress did not mandate MTBE's use, there
certainly is no compensation due to such manufacturers when
Congress determines that this additive is detrimental to water
quality protection and must be eliminated from widespread use
in gasoline. Given the history of the CAA oxygenate requirement
it is impossible to maintain otherwise. The majority views
appears to seek to set a precedent that would require Congress
to provide compensation for any parties that choose to invest
in manufacturing a product based on their interpretation of
congressional intent and its effect on their product. That is
not supported by the text of S. 606.
Finally, the majority views' inference that the transition
program reflects the committee view that companies will not
invest in fuel additives absent compensation is erroneous and
not supported by S. 606. Additive manufacturers are free to
enter the market for the production of additives to replace
MTBE. The legislation indicates that Congress is concerned
about the impact on the fuel supply of eliminating MTBE, as
stated in section 203, and has provided the transition
assistance to address that issue.
Congress `failure' to compensate MTBE producers for
manufacturing a product which many within the industry knew
would pollute drinking water will not affect a business
decision by additive manufacturers to supply the additive
market. This is particularly true once the modifications in S.
791 to the CAA are made to ensure future water quality
protection by improving testing of fuels and fuel additives
environmental and public health impacts. Oil companies and
other additive manufacturers have their own responsibility to
place products in commerce that do not have ill effects on the
environment and public health.
As noted above, several companies maliciously failed to
discharge this responsibility when it came to MTBE.
The first hearing of this committee on MTBE was chaired by
Senator Boxer in December 1997, after Santa Monica lost the
majority of its drinking water to contamination caused by a
then little known fuel additive. Since Senator Boxer's first
call to ban MTBE now over 5 years ago, this committee has
conducted scores of hearings, considered alternate legislative
approaches and ultimately approved various versions of
legislation similar to S. 606.
Such legislation approved by this committee has
consistently called for MTBE's phase-out. It has also
consistently rejected terminating the right of communities
affected by MTBE to seek redress against oil companies in
court. As consideration of S. 606 moves to the full Senate,
these two principles that have guided committee consideration
of the MTBE issue must remain in tact if the MTBE problem is to
be truly and equitably solved.
Backsliding on Toxics Emissions Performance
Since the implementation of fuels requirements of the 1990
Amendments to the Clean Air Act, as noted in the committee's
report, refiners have made significant progress in continually
improving toxics emissions performance of fuels. However, the
legislation approved by the committee does not adjust the anti-
backsliding provisions to maintain that record of improvement
and to reflect the passage of time. As a result, mobile source
toxics emissions could increase significantly if S. 606 were to
be enacted.
S. 606, the Reliable Fuels Act of 2005, includes a 1999-
2000 baseline against which to judge refiner and importer toxic
emissions reductions performance and uses that baseline to
ensure that the removal of MTBE via the ban included in the
legislation does not result in dirtier, more toxic fuel and
increase fuel-related toxic emissions. That baseline was first
included in S. 950 reported by the committee during the 107th
Congress in May 2001, approved by the Senate in early 2002 as
part of H.R. 4, the Energy Policy Act of 2002, and included S.
791 reported in June 2003. It reflected the baseline in the
EPA's mobile source air toxics rule promulgated in 1999.
However, over the last 4 years, refiners and importers
performance has continued to improve, such that a more
contemporaneous baseline is necessary to avoid backsliding on
toxics. Conventional and reformulated gasoline are both cleaner
now, using estimated national averages, than they were in 1999
and 2000. If the baseline in S. 606 is used, rather than a more
current baseline for which quality assured data is available,
such as 2001-2002 or later, refiners and importers would be
permitted to increase annual national emissions associated with
reformulated gasoline by as much as 2,000 tons of hazardous air
pollutants, such as xylene, toluene, benzene and many others.
Given the elevated cancer and non-cancer risks associated with
mobile sources of air toxics, especially in high-traffic urban
corridors, such increases would be harmful to public health and
welfare.
Such an outcome is the opposite of the committee's intent
when first approving this provision in identical form in 2001.
At that time, the committee sought to ensure that gasoline
producers or importers would not have the option of making
their product more toxic due to the ban on MTBE and the
renewable fuels mandate in the bill.
Leaking Underground Storage Tanks
Leaking underground storage tanks represent a significant
threat to drinking water supplies nationwide. Fifty percent of
all Americans and nearly 100 percent of people living in rural
areas rely on groundwater for their drinking water. Underground
storage tanks hold toxic substances such as gasoline, diesel
fuel, waste oil and other toxic materials that contain
dangerous cancer-causing chemicals. These chemicals move
quickly through the soil, getting into groundwater and causing
dangerous vapors in buildings. These chemicals cause cancer,
injure developing fetuses and harm human reproductive and
nervous systems.
In the 108th Congress, the Senate Environment and Public
Works Committee unanimously adopted a bipartisan comprehensive
underground storage tank legislation (S. 195, the Underground
Storage Tank Compliance Act of 2003). The committee should
build on this bipartisan approach to ensure that Americans are
protected from leaking underground storage tanks.
Unfortunately, S. 606 is not a comprehensive reform effort.
The Leaking Underground Storage Tank provisions of section
202 suffer from two significant problems. Most significantly,
the provision raids the LUST Trust Fund and diverts dollars
from their intended purpose--cleaning up contamination from
leaking USTs. Instead, the provision expands the eligible uses
of the LUST Trust Fund to pay for cleanup of contamination of
ether fuel additives from other sources such as pipelines,
cars, trucks, snowmobiles, boats, above ground storage tanks,
and other potential sources of contamination. EPA Administrator
Christine Todd Whitman sent a letter to Rep. W.J. ``Billy''
Tauzin on May 7, 2003 opposing this provision. She wrote:
Section 5 allows the use of the Leaking Underground
Storage Tank (LUST) Trust Fund for releases from
sources other than USTs. This would change the
historical scope of the program, and could stress the
Agency's ability to adequately address releases from
USTs.
Second, the provision specifically allows the use of LUST
Trust Fund money for cleanup of MTBE, but not other ethers such
as tertiary butyl alcohol (TBA), ethyl alcohol (ethanol) or any
other new fuel additive that might be used in the future. TBA
and ethanol are commonly found at LUST sites. LUST Trust Fund
money should be available to address all contamination from
USTs and should not be restricted to just MTBE, as is now
currently the case.
Finally, the bill lacks many of the essential elements of a
comprehensive LUST reform bill. For example, the Government
Accountability Office in March 2003 issued a report on the
Underground Storage Tank Program recommending a number of
improvements including the need to inspect UST facilities more
frequently at least once every 3 years. Current inspection
rates fall far short of this goal with many UST facilities
having never been inspected. We should work together again in
the 109th Congress to build on the success of last session's
bill to enhance this program to better prevent and respond to
contamination from LUSTs.
ADDITIONAL VIEWS OF SENATOR BOXER
I write separately here to raise an additional concern and
to strongly oppose the ``safe harbor'' provision in S. 606, The
Reliable Fuels Act of 2005, which creates broad liability
exemptions for renewable fuels. I have previously discussed at
length my reasons for opposing these provisions in my
additional views included in Senate Report 108-57. I urge my
colleagues to review that extensive analysis.
Under the renewable fuels mandate in S. 606, ethanol will
be the most commonly used renewable fuel for the foreseeable
future. Ethanol is a high-octane, water-free alcohol that has
been used in gasoline in the United States since 1979 when it
was introduced to enhance oxygen content in fuels.
Section 101 (p) of S. 606 contains a broad ``safe harbor''
liability waiver for renewable fuels. This language waives all
product liability design defect claims, including failure to
warn. Any claim that has not been filed by the date of
enactment of this section will be forever barred. Compliance
with laws and regulations is not necessary for receiving the
liability waiver, except for limited compliance with
requirements under the Clean Air Act.
This liability exemption is particularly dangerous because
there are many unanswered questions about ethanol. It is true
that ethanol does not have the same toxic chemicals in it as
other fuels and fuel additives. It also helps reduce the
production of carbon monoxide when fuel is burned. These are
real benefits.
However, ethanol also increases the formation of nitrogen
oxides, which leads to increases in smog. According to EPA's
1999 Blue Ribbon Panel Report on Oxygenates in Gasoline,
ethanol is extremely soluble in water and would spread if
leaked into the environment. It may further spread plumes of
benzene, toluene, ethyl benzene, and xylene because ethanol may
inhibit the breakdown of these toxic materials. In addition,
there are several studies demonstrating that ethanol increases
the size and migration of benzene plumes. Researchers say that
more groundwater wells will experience contamination from
methyl tertiary butyl ether (MTBE) and benzene, a known
carcinogen, if ethanol leaks into water supplies. There are
also questions about the impact of ethanol on sensitive
populations, such as children.
More study is needed. The Blue Ribbon Panel Report makes
this point in the section entitled ``Recommendations for
Evaluating and Learning from Experience:''
The introduction of reformulated gasoline has had
substantial air quality benefits, but has at the same
time raised significant issues about questions that
should be asked before widespread introduction of a new
broadly used product. The unanticipated effects of
reformulated gasoline on groundwater highlight the
importance of exploring the potential for adverse
effects in all media (air, soil, and water), and on
human and ecosystem health.
Questions surrounding ethanol's effects on public health
and the environment should be answered before Congress grants a
broad waiver from liability for its harmful effects. We should
err on the side of caution, and we should err on the side on
protecting taxpayers.
If ethanol harms public health or the environment, the
liability exemption in this bill would shift the burden to the
taxpayer in the event of a contamination of drinking water
supplies, which could leave many communities with cleanup costs
beyond their ability to pay. Polluters, not taxpayers or
victims of pollution, should pay for harm to pubic health and
the environment.
Supporters of this liability exemption argue that immunity
from product liability design defect claims is not so broad,
that it only protects polluters from one type of lawsuit. But,
they are ignoring the fact that product defect claims are the
clearest way to hold accountable those whose products cause
injury to public health or the environment. Litigation in
California involving drinking water contamination by MTBE,
agricultural chemicals (i.e. DBCP), dry cleaning compounds
(perc), and others all rest on claims that products were
defective in design.
Exempting polluters from a defective product claim is
hardly a narrow exemption. It risks letting the polluters off
the hook for their wrongdoing entirely and shifting the costs
of pollution to the taxpayers. The taxpayers are not
responsible for the pollution; the companies are. Taxpayers
should not foot the bill; the polluters should.
Supporters of this exemption also argue that negligence
claims are an adequate substitute for product liability design
defect claims. While negligence and design defect liability are
related legal theories, they are different. And negligence
alone is inadequate to protect a community from harm.
Negligence liability focuses on the defendants' conduct. In
other words, it focuses on the conduct of the individuals hired
by the oil companies. Design defect liability focuses on the
product.
To establish negligence, a public water agency would have
to show that each defendant knew (or reasonably should have
known) of the risk posed by the product, and that the defendant
acted unreasonably in failing to eliminate the risk. Customary
practice in an industry--such as commonly using a fuel additive
without any warning--and the reasonableness of that practice is
relevant as a defense in a negligence action. This makes it
difficult for an injured party to recover.
In contrast, an injured public water agency can establish
design defect liability in one of two ways. First, a product is
defective where the jury finds that the risk of danger inherent
in the challenged design outweighs the benefit of such design.
Second, even if a product is flawlessly designed or produced,
it may still be defective if the manufacturer provides
inadequate warnings or use instructions. A failure to warn
claim arises only for risks that the manufacturer either knew
about or that were knowable in light of generally recognized
and prevailing best scientific knowledge available at the time
of the product's manufacture and distribution.
Courts impose strict liability for design defects based on
strong public policy considerations. The costs of injuries
caused by defective products should be borne by the
manufacturers of those products, rather than by innocent
injured parties. This policy is especially strong where the
injury occurs to innocent bystanders, like public water
suppliers, who derive no economic benefit from the defective
product.
Supporters of the liability exemption also argue that it is
necessary because the bill is mandating the use of ethanol. Yet
Congress regularly mandates that manufacturers meet a variety
of guidelines and requirements, but does not in so doing exempt
all manufacturers from State and Federal product liability
design defect laws. When gasoline leaks today, there is no
loophole; the polluter pays, despite the fact that Congress
regulates gasoline. Congress mandated the installation of air
bags in automobiles, but did not say to those manufacturers
that they would not be liable for damages should their products
be defective. We should not give a free pass to ethanol.
Finally, supporters of the liability loophole claim that
ethanol is safe and no one needs to worry about the liability
exemption. If they are not worried, they do not need an
exemption and should not oppose striking it from the bill.
The ``safe harbor'' liability waiver for renewable fuels is
opposed by a wide variety of local and State governments, water
utilities, and public health, consumer and environmental
organizations representing millions of people potentially
affected by this ill conceived safe harbor provision.
Changes in Existing Law
In compliance with section 12 of rule XXVI of the Standing
Rules of the Senate, changes in existing law made by the bill
as reported are shown as follows: Existing law proposed to be
omitted is enclosed in [black brackets], new matter is printed
in italic, existing law in which no change is proposed is shown
in roman:
----------
THE CLEAN AIR ACT
TITLE I--AIR POLLUTION PREVENTION AND CONTROL
Part A--Air Quality and Emission Limitations
* * * * * * *
TITLE II--EMISSION STANDARDS FOR MOVING SOURCES
Sec. 201. Short title.
Part A--Motor Vehicle Emission and Fuel Standards
Sec. 202. Establishment of standards.
Sec. 203. Prohibited acts.
Sec. 204. Injunction proceedings.
Sec. 205. Civil penalties.
Sec. 206. Motor vehicle and motor vehicle engine compliance testing and
certification.
Sec. 207. Compliance by vehicles and engines in actual use.
Sec. 208. Information collection.
Sec. 209. State standards.
Sec. 210. State grants.
Sec. 211. Regulation of fuels.
Sec. 212. Renewable fuels.
Sec. 213. Fuel economy improvement from new motor vehicles.
Sec. 214. Study of particulate emissions from motor vehicles.
Sec. 215. High altitude performance adjustments.
Sec. 216. Definitions for part A.
Sec. 217. Motor vehicle compliance program fees.
Sec. 218. Prohibition on production of engines requiring leaded
gasoline.
Sec. 219. Urban bus standards.
Part B--Aircraft Emission Standards
Sec. 231. Establishment of standards.
Sec. 232. Enforcement of standards.
Sec. 233. State standards and controls.
Sec. 234. Definitions.
Part C--Clean Fuel Vehicles
Sec. 241. Definitions.
Sec. 242. Requirements applicable to clean fuel vehicles.
Sec. 243. Standards for light-duty clean fuel vehicles.
Sec. 244. Administration and enforcement as per California standards.
Sec. 245. Standards for heavy-duty clean-fuel vehicles (gvwr above 8,500
up to 26,000 lbs).
Sec. 246. Centrally fueled fleets.
Sec. 247. Vehicle conversions.
Sec. 248. Federal agency fleets.
Sec. 249. California pilot test program.
Sec. 250. General provisions.
Sec. 101. (a) * * *
* * * * * * *
regulation of fuels
Sec. 211. (a) * * *
* * * * * * *
(b)(1) For the purpose of registration of fuels and fuel
additives, the Administrator shall require--
(A) the manufacturer of any fuel to notify him as
to the commercial identifying name and manufacturer of
any additive contained in such fuel; the range of
concentration of any additive in the fuel; and the
purpose-in-use of any such additive; and
(B) the manufacturer of any additive to notify him
as to the chemical composition of such additive.
(2) For the purpose of registration of fuels and fuel
additives, the Administrator [may also] shall, on a regular
basis, require the manufacturer of any fuel or fuel additive--
[(A) to conduct tests to determine potential public
health effects of such fuel or additive (including, but
not limited to, carcinogenic, teratogenic, or mutagenic
effects), and]
(A) to conduct tests to determine potential public
health and environmental effects of the fuel or
additive (including carcinogenic, teratogenic, or
mutagenic effects); and
(B) to furnish the description of any analytical
technique that can be used to detect and measure any
additive in such fuel, the recommended range of
concentration of such additive, and the recommended
purpose-in-use of such additive, and such other
information as is reasonable and necessary to determine
the emissions resulting from the use of the fuel or
additive contained in such fuel, the effect of such
fuel or additive on the emission control performance of
any vehicle, vehicle engine, nonroad engine or nonroad
vehicle, or the extent to which such emissions affect
the public health or welfare.
Tests under subparagraph (A) shall be conducted in conformity
with test procedures and protocols established by the
Administrator. The results of such tests shall not be
considered confidential.
(3) Upon compliance with the provisions of this subsection,
including assurances that the Administrator will receive
changes in the information required, the Administrator shall
register such fuel or fuel additive.
(4) Study on certain fuel additives and blendstocks.--
(A) In general.--Not later than 2 years
after the date of enactment of this paragraph,
the Administrator shall--
(i) conduct a study on the effects
on public health (including the effects
on children, pregnant women, minority
or low-income communities, and other
sensitive populations), air quality,
and water resources of increased use
of, and the feasibility of using as
substitutes for methyl tertiary butyl
ether in gasoline--
(I) ethyl tertiary butyl
ether;
(II) tertiary amyl methyl
ether;
(III) di-isopropyl ether;
(IV) tertiary butyl
alcohol;
(V) other ethers and heavy
alcohols, as determined by then
Administrator;
(VI) ethanol;
(VII) iso-octane; and
(VIII) alkylates; and
(ii) conduct a study on the effects
on public health (including the effects
on children, pregnant women, minority
or low-income communities, and other
sensitive populations), air quality,
and water resources of the adjustment
for ethanol-blended reformulated
gasoline to the volatile organic
compounds performance requirements that
are applicable under paragraphs (1) and
(3) of section 211(k); and
(iii) submit to the Committee on
Environment and Public Works of the
Senate and the Committee on Energy and
Commerce of the House of
Representatives a report describing the
results of the studies under clauses
(i) and (ii).
(B) Contracts for study.--In carrying out
this paragraph, the Administrator may enter
into 1 or more contracts with nongovernmental
entities such as--
(i) the national energy
laboratories; and
(ii) institutions of higher
education (as defined in section 101 of
the Higher Education Act of 1965 (20
U.S.C. 1001)).
* * * * * * *
(c)(1) The Administrator may, from time to time on the
basis of information obtained under subsection (b) of this
section or other information available to him, by regulation,
control or prohibit the manufacture, introduction into
commerce, offering for sale, or sale of any fuel or fuel
additive for use in a motor vehicle, motor vehicle engine, or
nonroad engine or nonroad vehicle (A) if in the judgment of the
Administrator any fuel or fuel additive or emission product of
such fuel or fuel additive causes, or contributes, to [air
pollution which] air pollution, or water pollution, that may
reasonably be anticipated to endanger the public health or
welfare, or (B) if emission products of such fuel or fuel
additive will impair to a significant degree the performance of
any emission control device or system which is in general use,
or which the Administrator finds has been developed to a point
where in a reasonable time it would be in general use were such
regulation to be promulgated.
(2)(A) No fuel, class of fuels, or fuel additive may be
controlled or prohibited by the Administrator pursuant to
clause (A) of paragraph (1) except after consideration of all
relevant medical and scientific evidence available to him,
including consideration of other technologically or
economically feasible means of achieving emission standards
under section 202.
(B) No fuel or fuel additive may be controlled or
prohibited by the Administrator pursuant to clause (B) of
paragraph (1) except after consideration of available
scientific and economic data, including a cost benefit analysis
comparing emission control devices or systems which are or will
be in general use and require the proposed control or
prohibition with emission control devices or systems which are
or will be in general use and do not require the proposed
control or prohibition. On request of a manufacturer of motor
vehicles, motor vehicle engines, fuels, or fuel additives
submitted within 10 days of notice of proposed rulemaking, the
Administrator shall hold a public hearing and publish findings
with respect to any matter he is required to consider under
this subparagraph. Such findings shall be published at the time
of promulgation of final regulations.
(C) No fuel or fuel additive may be prohibited by the
Administrator under paragraph (1) unless he finds, and
publishes such finding, that in his judgment such prohibition
will not cause the use of any other fuel or fuel additive which
will produce emissions which will endanger the public health or
welfare to the same or greater degree than the use of the fuel
or fuel additive proposed to be prohibited.
(3)(A) For the purpose of obtaining evidence and data to
carry out paragraph (2), the Administrator may require the
manufacturer of any motor vehicle or motor vehicle engine to
furnish any information which has been developed concerning the
emissions from motor vehicles resulting from the use of any
fuel or fuel additive, or the effect of such use on the
performance of any emission control device or system.
(B) In obtaining information under subparagraph (A),
section 307 (a) (relating to subpenas) shall be applicable.
(4)(A) Except as otherwise provided in subparagraph (B) or
(C), no State (or political subdivision thereof) may prescribe
or attempt to enforce, for the purposes of motor vehicle
emission control, any control or prohibition respecting any
characteristic or component of a fuel or fuel additive in a
motor vehicle or motor vehicle engine--
(i) if the Administrator has found that no control
or prohibition of the characteristic or component of a
fuel or fuel additive under paragraph (1) is necessary
and has published his finding in the Federal Register,
or
(ii) if the Administrator has prescribed under
paragraph (1) a control or prohibition applicable to
such characteristic or component of a fuel or fuel
additive, unless State prohibition or control is
identical to the prohibition or control prescribed by
the Administrator.
(B) Any State for which application of section 209(a) has
at any time been waived under section 209(b) may at any time
prescribe and enforce, for the purpose of motor vehicle
emission control, or water quality protection, a control or
prohibition respecting any fuel or fuel additive.
[(C) A State]
(C) Authority of State to control fuels and fuel additives
for reasons of necessity.--
(i) In general.--A State may prescribe and enforce,
for purposes of motor vehicle emission control, a
control or prohibition respecting the use of a fuel or
fuel additive in a motor vehicle or motor vehicle
engine if an applicable implementation plan for such
State under section 110 so provides. The Administrator
may approve such provision in an implementation plan,
or promulgate an implementation plan containing such a
provision, only if he finds that the State control or
prohibition is necessary to achieve the national
primary or secondary ambient air quality standard which
the plan implements. The Administrator may find that a
State control or prohibition is necessary to achieve
that standard if no other measures that would bring
about timely attainment exist, or if other measures
exist and are technically possible to implement, but
are unreasonable or impracticable. The Administrator
may make a finding of necessity under this subparagraph
even if the plan for the area does not contain an
approved demonstration of timely attainment.
(ii) Enforcement by the Administrator.--In any case
in which a State prescribes and enforces a control or
prohibition under clause (i), the Administrator, at the
request of the State, shall enforce the control or
prohibition as if the control or prohibition had been
adopted under the other provisions of this section.
(5) Restrictions on use of MTBE.--
(A) In general.--Subject to subparagraph (E), not
later than 4 years after the date of enactment of this
paragraph, the use of methyl tertiary butyl ether in
motor vehicle fuel in any State other than a State
described in subparagraph (C) is prohibited.
(B) Regulations.--The Administrator shall
promulgate regulations to effect the prohibition in
subparagraph (A).
(C) States that authorize use.--A State described
in this subparagraph is a State that submits to the
Administrator a notice that the State authorizes use of
methyl tertiary butyl ether in motor vehicle fuel sold
or used in the State.
(D) Publication of notice.--The Administrator shall
publish in the Federal Register each notice submitted
by a State under subparagraph (C).
(E) Trace quantities.--In carrying out subparagraph
(A), the Administrator may allow trace quantities of
methyl tertiary butyl ether, not to exceed 0.5 percent
by volume, to be present in motor vehicle fuel in cases
that the Administrator determines to be appropriate.
(6) MTBE merchant producer conversion assistance.--
(A) In general.--
(i) Grants.--The Secretary of Energy, in
consultation with the Administrator, may make
grants to merchant producers of methyl tertiary
butyl ether in the United States to assist the
producers in the conversion of eligible
production facilities described in subparagraph
(C) to the production of--
(I) iso-octane or alkylates, unless
the Administrator, in consultation with
the Secretary of Energy, determines
that transition assistance for the
production of iso-octane or alkylates
is inconsistent with the criteria
specified in subparagraph (B); and
(II) any other fuel additive that
meets the criteria specified in
subparagraph (B).
(B) Criteria.--The criteria referred to in
subparagraph (A) are that--
(i) use of the fuel additive is consistent
with this subsection;
(ii) the Administrator has not determined
that the fuel additive may reasonably be
anticipated to endanger public health or the
environment;
(iii) the fuel additive has been registered
and tested, or is being tested, in accordance
with the requirements of this section; and
(iv) the fuel additive will contribute to
replacing quantities of motor vehicle fuel
rendered unavailable as a result of paragraph
(5).
(C) Eligible production facilities.--A production
facility shall be eligible to receive a grant under
this paragraph if the production facility--
(i) is located in the United States; and
(ii) produced methyl tertiary butyl ether
for consumption in nonattainment areas during
the period--
(I) beginning on the date of
enactment of this paragraph; and
(II) ending on the effective date
of the prohibition on the use of methyl
tertiary butyl ether under paragraph
(5).
(D) Authorization of appropriations.--There is
authorized to be appropriated to carry out this
paragraph $250,000,000 for each of fiscal years 2005
through 2008.
* * * * * * *
(d) Penalties and Injunctions.--
(1) Civil penalties.--Any person who violates
subsection (a), (f), (g), (k), (l), (m), [or (n)] (n),
or (o) of this section or the regulations prescribed
under subsection (c), (h), (i), (k), (l), (m), [or (n)]
(n), or (o) of this section or who fails to furnish any
information or conduct any tests required by the
Administrator under subsection (b) of this section
shall be liable to the United States for a civil
penalty of not more than the sum of $25,000 for every
day of such violation and the amount of economic
benefit or savings resulting from the violation. Any
violation with respect to a regulation prescribed under
subsection (c), (k), (l), [or (m)] (m), or (o) of this
section which establishes a regulatory standard based
upon a multiday averaging period shall constitute a
separate day of violation for each and every day in the
averaging period. Civil penalties shall be assessed in
accordance with subsections (b) and (c) of section 205.
(2) Injunctive authority.--The district courts of
the United States shall have jurisdiction to restrain
violations of subsections (a), (f), (g), (k), (l), (m),
[and (n)] (n), and (o) of this section and of the
regulations prescribed under subsections (c), (h), (i),
(k), (l), (m), [and (n)] (n), and (o) of this section,
to award other appropriate relief, and to compel the
furnishing of information and the conduct of tests
required by the Administrator under subsection (b) of
this section. Actions to restrain such violations and
compel such actions shall be brought by and in the name
of the United States. In any such action, subpoenas for
witnesses who are required to attend a district court
in any district may run into any other district.
* * * * * * *
(h) Reid Vapor Pressure Requirements.--
(1) Prohibition.--Not later than 6 months after the
date of the enactment of the Clean Air Act Amendments
of 1990, the Administrator shall promulgate regulations
making it unlawful for any person during the high ozone
season (as defined by the Administrator) to sell, offer
for sale, dispense, supply, offer for supply,
transport, or introduce into commerce gasoline with a
Reid Vapor Pressure in excess of 9.0 pounds per square
inch (psi). Such regulations shall also establish more
stringent Reid Vapor Pressure standards in a
nonattainment area as the Administrator finds necessary
to generally achieve comparable evaporative emissions
(on a per-vehicle basis) in nonattainment areas, taking
into consideration the enforceability of such
standards, the need of an area for emission control,
and economic factors.
(2) Attainment areas.--The regulations under this
subsection shall not make it unlawful for any person to
sell, offer for supply, transport, or introduce into
commerce gasoline with a Reid Vapor Pressure of 9.0
pounds per square inch (psi) or lower in any area
designated under section 107 as an attainment area.
Notwithstanding the preceding sentence, the
Administrator may impose a Reid vapor pressure
requirement lower than 9.0 pounds per square inch (psi)
in any area, formerly an ozone nonattainment area,
which has been redesignated as an attainment area.
(3) Effective date; enforcement.--The regulations
under this subsection shall provide that the
requirements of this subsection shall take effect not
later than the high ozone season for 1992, and shall
include such provisions as the Administrator determines
are necessary to implement and enforce the requirements
of this subsection.
(4) Ethanol waiver.--For fuel blends containing
gasoline and 10 percent denatured anhydrous ethanol,
the Reid vapor pressure limitation under this
subsection shall be one pound per square inch (psi)
greater than the applicable Reid vapor pressure
limitations established under paragraph (1); Provided,
however, that a distributor, blender, marketer,
reseller, carrier, retailer, or wholesale purchaser-
consumer shall be deemed to be in full compliance with
the provisions of this subsection and the regulations
promulgated thereunder if it can demonstrate (by
showing receipt of a certification or other evidence
acceptable to the Administrator) that--
(A) the gasoline portion of the blend
complies with the Reid vapor pressure
limitations promulgated pursuant to this
subsection;
(B) the ethanol portion of the blend does
not exceed its waiver condition under
subsection (f)(4); and
(C) no additional alcohol or other additive
has been added to increase the Reid Vapor
Pressure of the ethanol portion of the blend.
(5) Exclusion from ethanol waiver.--
(A) Promulgation of regulations.--Upon
notification, accompanied by supporting
documentation, from the Governor of a State
that the Reid vapor pressure limitation
established by paragraph (4) will increase
emissions that contribute to air pollution in
any area in the State, the Administrator shall,
by regulation, apply, in lieu of the Reid vapor
pressure limitation established by paragraph
(4), the Reid vapor pressure limitation
established by paragraph (1) to all fuel blends
containing gasoline and 10 percent denatured
anhydrous ethanol that are sold, offered for
sale, dispensed, supplied, offered for supply,
transported, or introduced into commerce in the
area during the high ozone season.
(B) Deadline for promulgation.--The
Administrator shall promulgate regulations
under subparagraph (A) not later than 90 days
after the date of receipt of a notification
from a Governor under that subparagraph.
(C) Effective date.--
(i) In general.--With respect to an
area in a State for which the Governor
submits a notification under
subparagraph (A), the regulations under
that subparagraph shall take effect on
the later of--
(I) the first day of the
first high ozone season for the
area that begins after the date
of receipt of the notification;
or
(II) 1 year after the date
of receipt of the notification.
(ii) Extension of effective date
Based on determination of insufficient
supply.--
(I) In general.--If, after
receipt of a notification with
respect to an area from a
Governor of a State under
subparagraph (A), the
Administrator determines, on
the Administrator's own motion
or on petition of any person
and after consultation with the
Secretary of Energy, that the
promulgation of regulations
described in subparagraph (A)
would result in an insufficient
supply of gasoline in the
State, the Administrator, by
regulation--
(aa) shall extend
the effective date of
the regulations under
clause (i) with respect
to the area for not
more than 1 year; and
(bb) may renew the
extension under item
(aa) for 2 additional
periods, each of which
shall not exceed 1
year.
(II) Deadline for action on
petitions.--The Administrator
shall act on any petition
submitted under subclause (I)
not later than 180 days after
the date of receipt of the
petition.
[(5)] (6) Areas covered.--The provisions of this
subsection shall apply only to the 48 contiguous States
and the District of Columbia.
* * * * * * *
(k) Reformulated Gasoline for Conventional Vehicles.--
(1) EPA regulations.--[Within 1 year after the
enactment of the Clean Air Act Amendments of 1990,]
(A) In general.--Not later than November
15, 1991, the Administrator shall promulgate
regulations under this section establishing
requirements for reformulated gasoline to be
used in gasoline-fueled vehicles in specified
nonattainment areas. Such regulations shall
require the greatest reduction in emissions of
ozone forming volatile organic compounds
(during the high ozone season) and emissions of
toxic air pollutants (during the entire year)
achievable through the reformulation of
conventional gasoline, taking into
consideration the cost of achieving such
emission reductions, any nonair-quality and
other air-quality related health and
environmental impacts and energy requirements.
(B) Maintenance of toxic air pollutant
emissions reductions from reformulated
Gasoline.--
(i) Definition of PADD.--In this
subparagraph the term `PADD' means a
Petroleum Administration for Defense
District.
(ii) Regulations concerning
emissions of toxic air pollutants.--Not
later than 270 days after the date of
enactment of this subparagraph, the
Administrator shall establish by
regulation, for each refinery or
importer (other than a refiner or
importer in a State that has received a
waiver under section 209(b) with
respect to gasoline produced for use in
that State), standards for toxic air
pollutants from use of the reformulated
gasoline produced or distributed by the
refiner or importer that maintain the
reduction of the average annual
aggregate emissions of toxic air
pollutants for reformulated gasoline
produced or distributed by the refiner
or importer during calendar years 1999
and 2000 (as determined on the basis of
data collected by the Administrator
with respect to the refiner or
importer).
(iii) Standards applicable to
specific refineries or importers.--
(I) Applicability of
standards.--For any calendar
year, the standards applicable
to a refiner or importer under
clause (ii) shall apply to the
quantity of gasoline produced
or distributed by the refiner
or importer in the calendar
year only to the extent that
the quantity is less than or
equal to the average annual
quantity of reformulated
gasoline produced or
distributed by the refiner or
importer during calendar years
1999 and 2000.
(II) Applicability of other
standards.--For any calendar
year, the quantity of gasoline
produced or distributed by a
refiner or importer that is in
excess of the quantity subject
to subclause (I) shall be
subject to standards for
emissions of toxic air
pollutants promulgated under
subparagraph (A) and paragraph
(3)(B).
(iv) Credit program.--The
Administrator shall provide for the
granting and use of credits for
emissions of toxic air pollutants in
the same manner as provided in
paragraph (7).
(v) Regional protection of toxics
reduction baselines.--
(I) In general.--Not later
than 60 days after the date of
enactment of this subparagraph,
and not later than April 1 of
each calendar year that begins
after that date of enactment,
the Administrator shall publish
in the Federal Register a
report that specifies, with
respect to the previous
calendar year--
(aa) the quantity
of reformulated
gasoline produced that
is in excess of the
average annual quantity
of reformulated
gasoline produced in
1999 and 2000; and
(bb) the reduction
of the average annual
aggregate emissions of
toxic air pollutants in
each PADD, based on
retail survey data or
data from other
appropriate sources.
(II) Effect of failure to
maintain aggregate toxics
reductions.--If, in any
calendar year, the reduction of
the average annual aggregate
emissions of toxic air
pollutants in a PADD fails to
meet or exceed the reduction of
the average annual aggregate
emissions of toxic air
pollutants in the PADD in
calendar years 1999 and 2000,
the Administrator, not later
than 90 days after the date of
publication of the report for
the calendar year under
subclause (I), shall--
(aa) identify, to
the maximum extent
practicable, the
reasons for the
failure, including the
sources, volumes, and
characteristics of
reformulated gasoline
that contributed to the
failure; and
(bb) promulgate
revisions to the
regulations promulgated
under clause (ii), to
take effect not earlier
than 180 days but not
later than 270 days
after the date of
promulgation, to
provide that,
notwithstanding clause
(iii)(II), all
reformulated gasoline
produced or distributed
at each refiner or
importer shall meet the
standards applicable
under clause (iii)(I)
beginning not later
than April 1 of the
calendar year following
publication of the
report under subclause
(I) and in each
calendar year
thereafter.
(vi) Regulations to control
hazardous air pollutants from motor
vehicles and motor vehicle fuels.--Not
later than July 1, 2005, the
Administrator shall promulgate final
regulations to control hazardous air
pollutants from motor vehicles and
motor vehicle fuels, as provided for in
section 80.1045 of title 40, Code of
Federal Regulations (as in effect on
the date of enactment of this
subparagraph).
(2) General requirements.--The regulations referred
to in paragraph (1) shall require that reformulated
gasoline comply with paragraph (3) and with each of the
following requirements (subject to paragraph (7)):
(A) NOx emissions.--The
emissions of oxides of nitrogen
(NOx) from baseline vehicles when
using the reformulated gasoline shall be no
greater than the level of such emissions from
such vehicles when using baseline gasoline. If
the Administrator determines that compliance
with the limitation on emissions of oxides of
nitrogen under the preceding sentence is
technically infeasible, considering the other
requirements applicable under this subsection
to such gasoline, the Administrator may, as
appropriate to ensure compliance with this
subparagraph, adjust (or waive entirely), any
other requirements of this paragraph
[(including the oxygen content requirement
contained in subparagraph (B))] or any
requirements applicable under paragraph (3)(A).
[(B) Oxygen content.--The oxygen content of
the gasoline shall equal or exceed 2.0 percent
by weight (subject to a testing tolerance
established by the Administrator) except as
otherwise required by this Act. The
Administrator may waive, in whole or in part,
the application of this subparagraph for any
ozone nonattainment area upon a determination
by the Administrator that compliance with such
requirement would prevent or interfere with the
attainment by the area of a national primary
ambient air quality standard.]
[(C)] (B) Benzene content.--The benzene
content of the gasoline shall not exceed 1.0
percent by volume.
[(D)] (C) Heavy metals.--The gasoline shall
have no heavy metals, including lead or
manganese. The Administrator may waive the
prohibition contained in this subparagraph for
a heavy metal (other than lead) if the
Administrator determines that addition of the
heavy metal to the gasoline will not increase,
on an aggregate mass or cancer-risk basis,
toxic air pollutant emissions from motor
vehicles.
(3) More stringent of formula or performance
standards.--The regulations referred to in paragraph
(1) shall require compliance with the more stringent of
either the requirements set forth in subparagraph (A)
or the requirements of subparagraph (B) of this
paragraph. For purposes of determining the more
stringent provision, clause (i) and clause (ii) of
subparagraph (B) shall be considered independently.
(A) Formula.--
(i) Benzene.--The benzene content
of the reformulated gasoline shall not
exceed 1.0 percent by volume.
(ii) Aromatics.--The aromatic
hydrocarbon content of the reformulated
gasoline shall not exceed 25 percent by
volume.
(iii) Lead.--The reformulated
gasoline shall have no lead content.
(iv) Detergents.--The reformulated
gasoline shall contain additives to
prevent the accumulation of deposits in
engines or vehicle fuel supply systems.
](v) Oxygen content.--The oxygen
content of the reformulated gasoline
shall equal or exceed 2.0 percent by
weight (subject to a testing tolerance
established by the Administrator)
except as otherwise required by this
Act.]
* * * * * * *
[(6) Opt-in areas.--(A) Upon]
(6) Opt-in areas.--
(A) Classified areas.--
(i) In general.--Upon the
application of the Governor of a State,
the Administrator shall apply the
prohibition set forth in paragraph (5)
in any area in the State classified
under subpart 2 of part D of title I as
a Marginal, Moderate, Serious, or
Severe Area (without regard to whether
or not the 1980 population of the area
exceeds 250,000). In any such case, the
Administrator shall establish an
effective date for such prohibition as
he deems appropriate, not later than
January 1, 1995, or 1 year after such
application is received, whichever is
later. The Administrator shall publish
such application in the Federal
Register upon receipt.
[(B) If]
(ii) Effect of insufficient
domestic capacity to produce
reformulated Gasoline.--If the
Administrator determines, on the
Administrator's own motion or on
petition of any person, after
consultation with the Secretary of
Energy, that there is insufficient
domestic capacity to produce gasoline
certified under this subsection, the
Administrator shall, by rule, extend
the effective date of such prohibition
in Marginal, Moderate, Serious, or
Severe Areas referred to in
[subparagraph (A)] clause (i) for one
additional year, and may, by rule,
renew such extension for 2 additional
one-year periods. The Administrator
shall act on any petition submitted
under [this paragraph] this
subparagraph within 6 months after
receipt of the petition. The
Administrator shall issue such
extensions for areas with a lower ozone
classification before issuing any such
extension for areas with a higher
classification.
(B) Ozone transport Region.--
(i) Application of prohibition.--
(I) In general.--On
application of the Governor of
a State in the ozone transport
region established by section
184(a), the Administrator, not
later than 180 days after the
date of receipt of the
application, shall apply the
prohibition specified in
paragraph (5) to any area in
the State (other than an area
classified as a marginal,
moderate, serious, or severe
ozone nonattainment area under
subpart 2 of part D of title I)
unless the Administrator
determines under clause (iii)
that there is insufficient
capacity to supply reformulated
gasoline.
(II) Publication of
application.--As soon as
practicable after the date of
receipt of an application under
subclause (I), the
Administrator shall publish the
application in the Federal
Register.
(ii) Period of applicability.--
Under clause (i), the prohibition
specified in paragraph (5) shall apply
in a State--
(I) commencing as soon as
practicable but not later than
2 years after the date of
approval by the Administrator
of the application of the
Governor of the State; and
(II) ending not earlier
than 4 years after the
commencement date determined
under subclause (I).
(iii) Extension of commencement
date Based on insufficient capacity.--
(I) In general.--If, after
receipt of an application from
a Governor of a State under
clause (i), the Administrator
determines, on the
Administrator's own motion or
on petition of any person,
after consultation with the
Secretary of Energy, that there
is insufficient capacity to
supply reformulated gasoline,
the Administrator, by
regulation--
(aa) shall extend
the commencement date
with respect to the
State under clause
(ii)(I) for not more
than 1 year; and
(bb) may renew the
extension under item
(aa) for 2 additional
periods, each of which
shall not exceed 1
year.
(II) Deadline for action on
petitions.--The Administrator
shall act on any petition
submitted under subclause (I)
not later than 180 days after
the date of receipt of the
petition.
(7) Credits.--(A) The regulations promulgated under
this subsection shall provide for the granting of an
appropriate amount of credits to a person who refines,
blends, or imports and certifies a gasoline or slate of
gasoline that--
[(i) has an oxygen content (by weight) that
exceeds the minimum oxygen content specified in
paragraph (2);]
[(ii)] (i) has an aromatic hydrocarbon
content (by volume) that is less than the
maximum aromatic hydrocarbon content required
to comply with paragraph (3); or
[(iii)] (ii) has a benzene content (by
volume) that is less than the maximum benzene
content specified in paragraph (2).
(B) The regulations described in subparagraph (A)
shall also provide that a person who is granted credits
may use such credits, or transfer all or a portion of
such credits to another person for use within the same
nonattainment area, for the purpose of complying with
this subsection.
(C) The regulations promulgated under subparagraphs
(A) and (B) shall ensure the enforcement of the
requirements for the issuance, application, and
transfer of the credits. Such regulations shall
prohibit the granting or transfer of such credits for
use with respect to any gasoline in a nonattainment
area, to the extent the use of such credits would
result in any of the following:
(i) An average gasoline aromatic
hydrocarbon content (by volume) for the
nonattainment (taking into account all gasoline
sold for use in conventional gasoline-fueled
vehicles in the nonattainment area) higher than
the average fuel aromatic hydrocarbon content
(by volume) that would occur in the absence of
using any such credits.
[(ii) An average gasoline oxygen content
(by weight) for the nonattainment area (taking
into account all gasoline sold for use in
conventional gasoline-fueled vehicles in the
nonattainment area) lower than the average
gasoline oxygen content (by weight) that would
occur in the absence of using any such
credits.]
[(iii)] (ii) An average benzene content (by
volume) for the nonattainment area (taking into
account all gasoline sold for use in
conventional gasoline-fueled vehicles in the
nonattainment area) higher than the average
benzene content (by volume) that would occur in
the absence of using any such credits.
* * * * * * *
(11) Commingling.--The regulations under paragraph
(1) shall permit the commingling at a retail station of
reformulated gasoline containing ethanol and
reformulated gasoline that does not contain ethanol if,
each time such commingling occurs--
(A) the retailer notifies the Administrator
before the commingling, identifying the exact
location of the retail station and the specific
tank in which the commingling will take place;
and
(B) the retailer certifies that the
reformulated gasoline resulting from the
commingling will meet all applicable
requirements for reformulated gasoline,
including content and emission performance
standards.
* * * * * * *
(n) Prohibition on Leaded Gasoline for Highway Use.--After
December 31, 1995, it shall be unlawful for any person to sell,
offer for sale, supply, offer for supply, dispense, transport,
or introduce into commerce, for use as fuel in any motor
vehicle (as defined in section 219(2)) any gasoline which
contains lead or lead additives.
(o) Renewable Fuel Program.--
(1) Definitions.--In this section:
(A) Cellulosic biomass ethanol.--The term
`cellulosic biomass ethanol' means ethanol
derived from any lignocellulosic or
hemicellulosic matter that is available on a
renewable or recurring basis, including--
(i) dedicated energy crops and
trees;
(ii) wood and wood residues;
(iii) plants;
(iv) grasses;
(v) agricultural residues;
(vi) fibers;
(vii) animal wastes and other waste
materials; and
(viii) municipal solid waste.
(B) Renewable fuel.--
(i) In general.--The term
`renewable fuel' means motor vehicle
fuel that--
(I)(aa) is produced from
grain, starch, oilseeds, or
other biomass; or
(bb) is natural gas
produced from a biogas source,
including a landfill, sewage
waste treatment plant, feedlot,
or other place where decaying
organic material is found; and
(II) is used to replace or
reduce the quantity of fossil
fuel present in a fuel mixture
used to operate a motor
vehicle.
(ii) Inclusion.--The term
`renewable fuel' includes--
(I) cellulosic biomass
ethanol; and
(II) biodiesel (as defined
in section 312(f) of the Energy
Policy Act of 1992 (42 U.S.C.
13220(f))).
(C) Small refinery.--The term `small
refinery' means a refinery for which the
average aggregate daily crude oil throughput
for a calendar year (as determined by dividing
the aggregate throughput for the calendar year
by the number of days in the calendar year)
does not exceed 75,000 barrels.
(2) Renewable fuel program.--
(A) Regulations.--
(i) In general.--Not later than 1
year after the date of enactment of
this paragraph, the Administrator shall
promulgate regulations to ensure that
gasoline sold or introduced into
commerce in the United States (except
in Alaska and Hawaii), on an annual
average basis, contains the applicable
volume of renewable fuel determined in
accordance with subparagraph (B).
(ii) Provisions of regulations.--
Regardless of the date of promulgation,
the regulations promulgated under
clause (i)--
(I) shall contain
compliance provisions
applicable to refineries,
blenders, distributors, and
importers, as appropriate, to
ensure that the requirements of
this paragraph are met; but
(II) shall not--
(aa) restrict
geographic areas in
which renewable fuel
may be used; or
(bb) impose any
per-gallon obligation
for the use of
renewable fuel.
(iii) Requirement in case of
failure to promulgate regulations.--If
the Administrator does not promulgate
regulations under clause (i), the
percentage of renewable fuel in
gasoline sold or dispensed to consumers
in the United States, on a volume
basis, shall be 1.8 percent for
calendar year 2006.
(B) Applicable volume.--
(i) Calendar years 2006 through
2012.--For the purpose of subparagraph
(A), the applicable volume for any of
calendar years 2006 through 2012 shall
be determined in accordance with the
following table:
Applicable volume of renewable fuel
Calendar year: (in billions of gallons):
2006.......................................... 3.8
2007.......................................... 4.1
2008.......................................... 4.5
2009.......................................... 4.9
2010.......................................... 5.3
2011.......................................... 5.7
2012.......................................... 6.0.
(ii) Calendar year 2013 and
thereafter.--For the purpose of
subparagraph (A), the applicable volume
for calendar year 2013 and each
calendar year thereafter shall be equal
to the product obtained by
multiplying--
(I) the number of gallons
of gasoline that the
Administrator estimates will be
sold or introduced into
commerce in the calendar year;
and
(II) the ratio that--
(aa) 6,000,000,000
gallons of renewable
fuel; bears to
(bb) the number of
gallons of gasoline
sold or introduced into
commerce in calendar
year 2012.
(3) Applicable percentages.--
(A) Provision of estimate of volumes of
Gasoline sales.--Not later than October 31 of
each of calendar years 2005 through 2011, the
Administrator of the Energy Information
Administration shall provide to the
Administrator of the Environmental Protection
Agency an estimate, with respect to the
following calendar year, of the volumes of
gasoline projected to be sold or introduced
into commerce in the United States.
(B) Determination of applicable
percentages.--
(i) In general.--Not later than
November 30 of each of calendar years
2005 through 2012, based on the
estimate provided under subparagraph
(A), the Administrator of the
Environmental Protection Agency shall
determine and publish in the Federal
Register, with respect to the following
calendar year, the renewable fuel
obligation that ensures that the
requirements of paragraph (2) are met.
(ii) Required elements.--The
renewable fuel obligation determined
for a calendar year under clause (i)
shall--
(I) be applicable to
refineries, blenders, and
importers, as appropriate;
(II) be expressed in terms
of a volume percentage of
gasoline sold or introduced
into commerce in the United
States; and
(III) subject to
subparagraph (C)(i), consist of
a single applicable percentage
that applies to all categories
of persons specified in
subclause (I).
(C) Adjustments.--In determining the
applicable percentage for a calendar year, the
Administrator shall make adjustments--
(i) to prevent the imposition of
redundant obligations on any person
specified in subparagraph (B)(ii)(I);
and
(ii) to account for the use of
renewable fuel during the previous
calendar year by small refineries that
are exempt under paragraph (9).
(4) Cellulosic biomass ethanol.--For the purpose of
paragraph (2), 1 gallon of cellulosic biomass ethanol
shall be considered to be the equivalent of 1.5 gallons
of renewable fuel.
(5) Credit program.--
(A) In general.--The regulations
promulgated under paragraph (2)(A) shall
provide--
(i) for the generation of an
appropriate amount of credits by any
person that refines, blends, or imports
gasoline that contains a quantity of
renewable fuel that is greater than the
quantity required under paragraph (2);
(ii) for the generation of an
appropriate amount of credits for
biodiesel; and
(iii) for the generation of credits
by small refineries in accordance with
paragraph (9)(C).
(B) Use of credits.--A person that
generates credits under subparagraph (A) may
use the credits, or transfer all or a portion
of the credits to another person, for the
purpose of complying with paragraph (2).
(C) Duration of credits.--A credit
generated under this paragraph shall be valid
to show compliance--
(i) subject to clause (ii), for the
calendar year in which the credit was
generated or the following calendar
year; or
(ii) if the Administrator
promulgates regulations under paragraph
(6), for the calendar year in which the
credit was generated or any of the
following 2 calendar years.
(D) Inability to generate or purchase
sufficient credits.--The regulations
promulgated under paragraph (2)(A) shall
include provisions allowing any person that is
unable to generate or purchase sufficient
credits to meet the requirements of paragraph
(2) to carry forward a renewable fuel deficit
on condition that the person, in the calendar
year following the year in which the renewable
fuel deficit is created--
(i) achieves compliance with the
renewable fuel requirement under
paragraph (2); and
(ii) generates or purchases
additional renewable fuel credits to
offset the renewable fuel deficit of
the previous year.
(6) Seasonal variations in renewable fuel use.--
(A) Study.--For each of calendar years 2006
through 2012, the Administrator of the Energy
Information Administration shall conduct a
study of renewable fuel blending to determine
whether there are excessive seasonal variations
in the use of renewable fuel.
(B) Regulation of excessive seasonal
variations.--If, for any calendar year, the
Administrator of the Energy Information
Administration, based on the study under
subparagraph (A), makes the determinations
specified in subparagraph (C), the
Administrator of the Environmental Protection
Agency shall promulgate regulations to ensure
that 35 percent or more of the quantity of
renewable fuel necessary to meet the
requirements of paragraph (2) is used during
each of the 2 periods specified in subparagraph
(D) of each subsequent calendar year.
(C) Determinations.--The determinations
referred to in subparagraph (B) are that--
(i) less than 35 percent of the
quantity of renewable fuel necessary to
meet the requirements of paragraph (2)
has been used during 1 of the 2 periods
specified in subparagraph (D) of the
calendar year; and
(ii) a pattern of excessive
seasonal variation described in clause
(i) will continue in subsequent
calendar years.
(D) Periods.--The 2 periods referred to in
this paragraph are--
(i) April through September; and
(ii) January through March and
October through December.
(E) Exclusion.--Renewable fuel blended or
consumed in calendar year 2006 in a State that
has received a waiver under section 209(b)
shall not be included in the study under
subparagraph (A).
(7) Waivers.--
(A) In general.--The Administrator, in
consultation with the Secretary of Agriculture
and the Secretary of Energy, may waive the
requirements of paragraph (2) in whole or in
part on petition by 1 or more States by
reducing the national quantity of renewable
fuel required under paragraph (2)--
(i) based on a determination by the
Administrator, after public notice and
opportunity for comment, that
implementation of the requirement would
severely harm the economy or
environment of a State, a region, or
the United States; or
(ii) based on a determination by
the Administrator, after public notice
and opportunity for comment, that there
is an inadequate domestic supply or
distribution capacity to meet the
requirement.
(B) Petitions for waivers.--The
Administrator, in consultation with the
Secretary of Agriculture and the Secretary of
Energy, shall approve or disapprove a State
petition for a waiver of the requirements of
paragraph (2) within 90 days after the date on
which the petition is received by the
Administrator.
(C) Termination of waivers.--A waiver
granted under subparagraph (A) shall terminate
after 1 year, but may be renewed by the
Administrator after consultation with the
Secretary of Agriculture and the Secretary of
Energy.
(8) Study and waiver for initial year of program.--
(A) In general.--Not later than 180 days
after the date of enactment of this paragraph,
the Secretary of Energy shall conduct for the
Administrator a study assessing whether the
renewable fuel requirement under paragraph (2)
will likely result in significant adverse
impacts on consumers in 2006, on a national,
regional, or State basis.
(B) Required evaluations.--The study shall
evaluate renewable fuel--
(i) supplies and prices;
(ii) blendstock supplies; and
(iii) supply and distribution
system capabilities.
(C) Recommendations by the Secretary.--
Based on the results of the study, the
Secretary of Energy shall make specific
recommendations to the Administrator concerning
waiver of the requirements of paragraph (2), in
whole or in part, to prevent any adverse
impacts described in subparagraph (A).
(D) Waiver.--
(i) In general.--Not later than 270
days after the date of enactment of
this paragraph, the Administrator
shall, if and to the extent recommended
by the Secretary of Energy under
subparagraph (C), waive, in whole or in
part, the renewable fuel requirement
under paragraph (2) by reducing the
national quantity of renewable fuel
required under paragraph (2) in
calendar year 2006.
(ii) No effect on waiver
authority.--Clause (i) does not limit
the authority of the Administrator to
waive the requirements of paragraph (2)
in whole, or in part, under paragraph
(7).
(9) Small refineries.--
(A) Temporary exemption.--
(i) In general.--The requirements
of paragraph (2) shall not apply to
small refineries until calendar year
2011.
(ii) Extension of exemption.--
(I) Study by Secretary of
Energy.--Not later than
December 31, 2008, the
Secretary of Energy shall
conduct for the Administrator a
study to determine whether
compliance with the
requirements of paragraph (2)
would impose a disproportionate
economic hardship on small
refineries.
(II) Extension of
exemption.--In the case of a
small refinery that the
Secretary of Energy determines
under subclause (I) would be
subject to a disproportionate
economic hardship if required
to comply with paragraph (2),
the Administrator shall extend
the exemption under clause (i)
for the small refinery for a
period of not less than 2
additional years.
(B) Petitions based on disproportionate
economic hardship.--
(i) Extension of exemption.--A
small refinery may at any time petition
the Administrator for an extension of
the exemption under subparagraph (A)
for the reason of disproportionate
economic hardship.
(ii) Evaluation of petitions.--In
evaluating a petition under clause (i),
the Administrator, in consultation with
the Secretary of Energy, shall consider
the findings of the study under
subparagraph (A)(ii) and other economic
factors.
(iii) Deadline for action on
petitions.--The Administrator shall act
on any petition submitted by a small
refinery for a hardship exemption not
later than 90 days after the date of
receipt of the petition.
(C) Credit program.--If a small refinery
notifies the Administrator that the small
refinery waives the exemption under
subparagraph (A), the regulations promulgated
under paragraph (2)(A) shall provide for the
generation of credits by the small refinery
under paragraph (5) beginning in the calendar
year following the date of notification.
(D) Opt-in for small refineries.--A small
refinery shall be subject to the requirements
of paragraph (2) if the small refinery notifies
the Administrator that the small refinery
waives the exemption under subparagraph (A).
(10) Ethanol market concentration analysis.--
(A) Analysis.--
(i) In general.--Not later than 180
days after the date of enactment of
this paragraph, and annually
thereafter, the Federal Trade
Commission shall perform a market
concentration analysis of the ethanol
production industry using the
Herfindahl-Hirschman Index to determine
whether there is sufficient competition
among industry participants to avoid
price-setting and other anticompetitive
behavior.
(ii) Scoring.--For the purpose of
scoring under clause (i) using the
Herfindahl-Hirschman Index, all
marketing arrangements among industry
participants shall be considered.
(B) Report.--Not later than December 1,
2005, and annually thereafter, the Federal
Trade Commission shall submit to Congress and
the Administrator a report on the results of
the market concentration analysis performed
under subparagraph (A)(i).
(p) Renewable Fuel Safe Harbor.--
(1) In general.--
(A) Safe harbor.--Notwithstanding any other
provision of Federal or State law, no renewable
fuel (as defined in subsection (o)(1)) used or
intended to be used as a motor vehicle fuel,
nor any motor vehicle fuel containing renewable
fuel, shall be deemed to be defective in design
or manufacture by reason of the fact that the
fuel is, or contains, renewable fuel, if--
(i) the fuel does not violate a
control or prohibition imposed by the
Administrator under this section; and
(ii) the manufacturer of the fuel
is in compliance with all requests for
information under subsection (b).
(B) Safe harbor not applicable.--In any
case in which subparagraph (A) does not apply
to a quantity of fuel, the existence of a
design defect or manufacturing defect with
respect to the fuel shall be determined under
otherwise applicable law.
(2) Exception.--This subsection does not apply to
ethers.
(3) Applicability.--This subsection applies with
respect to all claims filed on or after the date of
enactment of this subsection.
(q) Analyses of Motor Vehicle Fuel Changes and Emissions
Model.--
(1) Anti-backsliding analysis.--
(A) Draft analysis.--Not later than 4 years
after the date of enactment of this paragraph,
the Administrator shall publish for public
comment a draft analysis of the changes in
emissions of air pollutants and air quality due
to the use of motor vehicle fuel and fuel
additives resulting from implementation of the
amendments made by the Federal Reformulated
Fuels Act of 2005.
(B) Final analysis.--After providing a
reasonable opportunity for comment but not
later than 5 years after the date of enactment
of this paragraph, the Administrator shall
publish the analysis in final form.
(2) Emissions model.--For the purposes of this
section, not later than 4 years after the date of
enactment of this paragraph, the Administrator shall
develop and finalize an emissions model that reflects,
to the maximum extent practicable, the effects of
gasoline characteristics or components on emissions
from vehicles in the motor vehicle fleet during
calendar year 2007.
(3) Permeation effects study.--
(A) In general.--Not later than 1 year
after the date of enactment of this paragraph,
the Administrator shall conduct a study, and
report to Congress the results of the study, on
the effects of ethanol content in gasoline on
permeation, the process by which fuel molecules
migrate through the elastomeric materials
(rubber and plastic parts) that make up the
fuel and fuel vapor systems of a motor vehicle.
(B) Evaporative emissions.--The study shall
include estimates of the increase in total
evaporative emissions likely to result from the
use of gasoline with ethanol content in a motor
vehicle, and the fleet of motor vehicles, due
to permeation.
[(o)] (r) Fuel and Fuel Additive Importers and
Importation.--For the purposes of this section, the term
``manufacturer'' includes an importer and the term
``manufacture'' includes importation.
SEC. 212. RENEWABLE FUEL.
(a) Definitions.--In this section:
(1) Municipal solid waste.--The term `municipal
solid waste' has the meaning given the term `solid
waste' in section 1004 of the Solid Waste Disposal Act
(42 U.S.C. 6903).
(2) RFG State.--The term `RFG State' means a State
in which is located 1 or more covered areas (as defined
in section 211(k)(10)(D)).
(3) Secretary.--The term `Secretary' means the
Secretary of Energy.
(b) Survey of Renewable Fuel Market.--
(1) Survey and report.--Not later than December 1,
2006, and annually thereafter, the Administrator
shall--
(A) conduct, with respect to each
conventional gasoline use area and each
reformulated gasoline use area in each State, a
survey to determine the market shares of--
(i) conventional gasoline
containing ethanol;
(ii) reformulated gasoline
containing ethanol;
(iii) conventional gasoline
containing renewable fuel; and
(iv) reformulated gasoline
containing renewable fuel; and
(B) submit to Congress, and make publicly
available, a report on the results of the
survey under subparagraph (A).
(2) Recordkeeping and reporting requirements.--
(A) In general.--The Administrator may
require any refiner, blender, or importer to
keep such records and make such reports as are
necessary to ensure that the survey conducted
under paragraph (1) is accurate.
(B) Reliance on existing requirements.--To
avoid duplicative requirements, in carrying out
subparagraph (A), the Administrator shall rely,
to the maximum extent practicable, on reporting
and recordkeeping requirements in effect on the
date of enactment of this section.
(3) Confidentiality.--Activities carried out under
this subsection shall be conducted in a manner designed
to protect confidentiality of individual responses.
(c) Cellulosic Biomass Ethanol And Municipal Solid Waste
Loan Guarantee Program.--
(1) In general.--Funds may be provided for the cost
(as defined in the Federal Credit Reform Act of 1990 (2
U.S.C. 661 et seq.)) of loan guarantees issued under
section 19 of the Federal Nonnuclear Energy Research
and Development Act of 1974 (42 U.S.C. 5919) to carry
out celluosic biomass commercial demonstration
projects.
(2) Demonstration projects.--
(A) In general.--The Secretary shall issue
loan guarantees under this section to carry out
not more than 4 projects to commercially
demonstrate the feasibility and viability of
producing cellulosic biomass ethanol, including
at least 1 project that uses cereal straw as a
feedstock and 1 project that uses municipal
solid waste as a feedstock.
(B) Design capacity.--Each project shall
have a design capacity to produce at least
30,000,000 gallons of cellulosic biomass
ethanol each year.
(3) Applicant assurances.--An applicant for a loan
guarantee under this section shall provide assurances,
satisfactory to the Secretary, that--
(A) the project design has been validated
through the operation of a continuous process
facility with a cumulative output of at least
50,000 gallons of ethanol;
(B) the project has been subject to a full
technical review;
(C) the project is covered by adequate
project performance guarantees;
(D) the project, with the loan guarantee,
is economically viable; and
(E) there is a reasonable assurance of
repayment of the guaranteed loan.
(4) Limitations.--
(A) Maximum guarantee.--Except as provided
in subparagraph (B), notwithstanding section
19(c)(2)(A) of the Federal Nonnuclear Energy
Research and Development Act of 1974 (42 U.S.C.
5919(c)(2)(A)), a loan guarantee under this
section may be issued for up to 80 percent of
the estimated cost of a project, but may not
exceed $250,000,000 for a project.
(B) Additional guarantees.--
(i) In general.--The Secretary may
issue additional loan guarantees for a
project to cover up to 80 percent of
the excess of actual project cost over
estimated project cost but not to
exceed 15 percent of the amount of the
original guarantee.
(ii) Principal and interest.--
Subject to subparagraph (A), the
Secretary shall guarantee 100 percent
of the principal and interest of a loan
made under subparagraph (A).
(5) Equity contributions.--To be eligible for a
loan guarantee under this section, an applicant for the
loan guarantee shall have binding commitments from
equity investors to provide an initial equity
contribution of at least 20 percent of the total
project cost.
(6) Effect of other laws.--The following provisions
are inapplicable to a loan guarantee made under this
section:
(A) Subsections (m) and (p) of section 19
of the Federal Nonnuclear Energy Research and
Development Act of 1974 (42 U.S.C. 5919).
(B) The first, third, and fourth sentences
of section 19(g)(4) of that Act.
(7) Insufficient amounts.--If the amount made
available to carry out this section is insufficient to
allow the Secretary to make loan guarantees for 3
projects described in subsection (b), the Secretary
shall issue loan guarantees for 1 or more qualifying
projects under this section in the order in which the
applications for the projects are received by the
Secretary.
(8) Approval.--An application for a loan guarantee
under this section shall be approved or disapproved by
the Secretary not later than 90 days after the
application is received by the Secretary.
(d) Authorization of Appropriations for Resource Center.--
There is authorized to be appropriated, for a resource center
to further develop bioconversion technology using low-cost
biomass for the production of ethanol at the Center for
Biomass-Based Energy at the University of Mississippi and the
University of Oklahoma, $4,000,000 for each of fiscal years
2005 through 2007.
(e) Renewable Fuel Production Research and Development
Grants.--
(1) In general.--The Administrator shall provide
grants for the research into, and development and
implementation of, renewable fuel production
technologies in RFG States with low rates of ethanol
production, including low rates of production of
cellulosic biomass ethanol.
(2) Eligibility.--
(A) In general.--The entities eligible to
receive a grant under this subsection are
academic institutions in RFG States, and
consortia made up of combinations of academic
institutions, industry, State government
agencies, or local government agencies in RFG
States, that have proven experience and
capabilities with relevant technologies.
(B) Application.--To be eligible to receive
a grant under this subsection, an eligible
entity shall submit to the Administrator an
application in such manner and form, and
accompanied by such information, as the
Administrator may specify.
(3) Authorization of appropriations.--There is
authorized to be appropriated to carry out this
subsection $25,000,000 for each of fiscal years 2006
through 2010.
(f) Cellulosic Biomass Ethanol Conversion Assistance.--
(1) In general.--The Secretary may provide grants
to merchant producers of cellulosic biomass ethanol in
the United States to assist the producers in building
eligible production facilities described in paragraph
(2) for the production of cellulosic biomass ethanol.
(2) Eligible production facilities.--A production
facility shall be eligible to receive a grant under
this subsection if the production facility--
(A) is located in the United States; and
(B) uses cellulosic biomass feedstocks
derived from agricultural residues or municipal
solid waste.
(3) Authorization of appropriations.--There is
authorized to be appropriated to carry out this
subsection--
(A) $250,000,000 for fiscal year 2005; and
(B) $400,000,000 for fiscal year 2006.
* * * * * * *
----------
DEPARTMENT OF ENERGY ORGANIZATION ACT
Sec. 205. (a)(1) * * *
* * * * * * *
(l) In order to improve the ability to evaluate the
effectiveness of the Nation's energy efficiency policies and
programs, the Administrator shall, in carrying out the data
collection provisions of subsections (i) and (k), consider--
(1) expanding the survey instruments to include
questions regarding participation in Government and
utility conservation programs;
(2) expanding fuel-use surveys in order to provide
greater detail on energy use by user subgroups; and
(3) expanding the scope of data collection on
energy efficiency and load-management programs,
including the effects of building construction
practices such as those designed to obtain peak load
shifting.
(m) Survey of Renewable Fuels Consumption.--
(1) In general.--In order to improve the ability to
evaluate the effectiveness of the Nation's renewable
fuels mandate, the Administrator shall conduct and
publish the results of a survey of renewable fuels
consumption in the motor vehicle fuels market in the
United States monthly, and in a manner designed to
protect the confidentiality of individual responses.
(2) Elements of survey.--In conducting the survey,
the Administrator shall collect information
retrospectively to 1998, on a national basis and a
regional basis, including--
(A) the quantity of renewable fuels
produced;
(B) the cost of production;
(C) the cost of blending and marketing;
(D) the quantity of renewable fuels
blended;
(E) the quantity of renewable fuels
imported; and
(F) market price data.
* * * * * * *
----------
SOLID WASTE DISPOSAL ACT
* * * * * * *
short title and table of contents
Sec. 1001. This title (hereinafter in this title referred
to as ``this Act''), together with the following table of
contents, may be cited as the ``Solid Waste Disposal Act'':
Subtitle A--General Provisions
* * * * * * *
Subtitle I--Regulation of Underground Storage Tanks
Sec. 9001. Definitions.
Sec. 9002. Notification.
Sec. 9003. Release detection, prevention, and correction regulations.
Sec. 9004. Approval of State programs.
Sec. 9005. Inspections, monitoring, and testing.
Sec. 9006. Federal enforcement.
Sec. 9007. Federal facilities.
Sec. 9008. State authority.
Sec. 9009. Study of underground storage tanks.
[Sec. 9010. Authorization of appropriations.]
Sec. 9010. Release prevention and compliance.
Sec. 9011. Authorization of appropriations.
* * * * * * *
Subtitle I--Regulation of Underground Storage Tanks
definitions and exemptions
Sec. 9001. For the purposes of this subtitle--
(1) * * *
* * * * * * *
(3) The term ``owner'' means--
(A) in the case of an underground storage
tank in use on the date of enactment of the
Hazardous and Solid Waste Amendments of 1984,
or brought into use after that date, any person
who owns an underground storage tank used for
the storage, use, or dispensing of regulated
[sustances] substances, and
* * * * * * *
release detection, prevention, and correction regulations
Sec. 9003. (a) * * *
* * * * * * *
(f) Effective Dates.--(1) Regulations issued pursuant to
[subsection (c) and (d) of this section] subsections (c) and
(d), and standards issued pursuant to subsection (e) of this
section, for underground storage tanks containing regulated
substances defined in section 9001(2)(B) (petroleum, including
crude oil or any fraction thereof which is liquid at standard
conditions of temperature and pressure) shall be effective not
later than thirty months after the date of enactment of the
Hazardous and Solid Waste Amendments of 1984.
* * * * * * *
(h) EPA Response Program for Petroleum.--
(1) * * *
* * * * * * *
(7) State authorities.--
(A) General.--A State may exercise the
authorities in [paragraphs (1) and (2) of this
subsection] paragraphs (1), (2), and (12),
subject to the terms and conditions of
paragraphs (3), (5), (9), (10), and (11), and
including the authorities of paragraphs (4),
(6), and (8) of this subsection and section
9010 if--
(i) the Administrator determines
that the State has the capabilities to
carry out effective corrective actions
and enforcement activities; and
(ii) the Administrator enters into
a cooperative agreement with the State
setting out the actions to be
undertaken by the State.
The Administrator may provide funds from the
Leaking Underground Storage Tank Trust Fund for
the reasonable costs of the State's actions
under the cooperative agreement.
* * * * * * *
(12) Remediation of contamination from ether fuel
additives.--
(A) In general.--The Administrator and the
States may use funds made available under
section 9013(1) to carry out corrective actions
with respect to a release of methyl tertiary
butyl ether or other ether fuel additive that
presents a threat to human health, welfare, or
the environment.
(B) Applicable authority.--Subparagraph (A)
shall be carried out--
(i) in accordance with paragraph
(2), except that a release with respect
to which a corrective action is carried
out under subparagraph (A) shall not be
required to be from an underground
storage tank; and
(ii) in the case of a State, in
accordance with a cooperative agreement
entered into by the Administrator and
the State under paragraph (7).
* * * * * * *
approval of state programs
Sec. 9004. (a) Elements of State Program.--Beginning 30
months after the date of enactment of the Hazardous and Solid
Waste Amendments of 1984, any State may, submit an underground
storage tank release detection, prevention, and correction
program for review and approval by the Administrator. The
program may cover tanks used to store regulated substances
[referred to in 9001(2) (A) or (B) or both.] referred to in
subparagraph (A) or (B), or both, of section 9001(2). A State
program may be approved by the Administrator under this section
only if the State demonstrates that the State program includes
the following requirements and standards and provides for
adequate enforcement of compliance with such requirements and
standards--
* * * * * * *
INSPECTIONS, MONITORING, TESTING, AND CORRECTIVE ACTION
Sec. 9005. (a) Furnishing Information.--For the purposes of
developing or assisting in the development of any regulation,
conducting any [study taking] study, taking any corrective
action, or enforcing the provisions of this subtitle, any owner
or operator of an underground storage tank (or any tank subject
to study under section 9009 that is used for storing regulated
substances) shall, upon request of any officer, employee or
representative of the Environmental Protection Agency, duly
designated by the Administrator, or upon request of any duly
designated officer, employee, or representative of a State
acting parsuant to subsection (h)(7) of section 9003 or with an
approved program, furnish information relating to such tanks,
their associated equipment, their contents, conduct monitoring
or testing, permit such officer at all reasonable times to have
access to, and to copy all records relating to such tanks and
permit such officer to have access for corrective action. For
the purposes of developing or assisting in the development of
any regulation, conducting any study, taking corrective action,
or enforcing the provisions of this subtitle, such officers,
employees, or representatives are authorized--
* * * * * * *
(b) Confidentiality.--(1) Any records, reports, or
information obtained from any persons under this section shall
be available to the public, except that upon a showing
satisfactory to the Administrator (or the State, as the case
may be) by any person that records, reports, or information, or
a particular part thereof, to which the Administrator (or the
State, as the case may be) or any officer, employee, or
representative thereof has access under this section if made
public, would divulge information entitled to protection under
section 1905 of title 18 of the United States Code, such
information or particular portion thereof shall be considered
confidential in accordance with the purposes of that section,
except that such record, report, document, or information may
be disclosed to other officers, employees, or authorized
representatives of the United States concerned with carrying
out this Act, or when [relevent] relevant in any proceeding
under this Act.
(2) Any person not subject to the provisions of section
1905 of title 18 of the United States Code who knowingly and
willfully divulges or discloses any information entitled to
protection under this subsection shall, upon conviction, be
subject to a fine of not more than $5,000 or to imprisonment
not to exceed one year, or both.
(3) In submitting data under this subtitle, a person
required to provide such data may--
(A) designate the data which such person believes
is entitled to protection under this subsection, and
(B) submit such designated data separately from
other data submitted under this subtitle.
A designation under this paragraph shall be made in writing and
in such manner as the Administrator may prescribe.
(4) Notwithstanding any limitation contained in this
section or any other provision of law, all information reported
to, or otherwise obtained, by the Administrator (or any
representative of the Administrator) under this Act shall be
made available, upon written request of any duly authorized
committee of the Congress, to such committee (including
records, reports, or information obtained by representatives of
the [Evironmental] Environmental Protection Agency).
* * * * * * *
authorization of appropriations
[Sec. 9010. For authorization of appropriations to carry
out this subtitle, see section 2007(g).]
SEC. 9010. RELEASE PREVENTION AND COMPLIANCE.
Funds made available under section 9013(2) from the Leaking
Underground Storage Tank Trust Fund may be used for conducting
inspections, or for issuing orders or bringing actions under
this subtitle--
(1) by a State (pursuant to section 9003(h)(7))
acting under--
(A) a program approved under section 9004;
or
(B) State requirements regulating
underground storage tanks that are similar or
identical to this subtitle, as determined by
the Administrator; and
(2) by the Administrator, acting under this
subtitle or a State program approved under section
9004.
SEC. 9011. AUTHORIZATION OF APPROPRIATIONS.
In addition to amounts made available under section
2007(f), there are authorized to be appropriated from the
Leaking Underground Storage Tank Trust Fund, notwithstanding
section 9508(c)(1) of the Internal Revenue Code of 1986--
(1) to carry out section 9003(h)(12), $200,000,000
for fiscal year 2005, to remain available until
expended; and
(2) to carry out section 9010--
(A) $50,000,000 for fiscal year 2005; and
(B) $30,000,000 for fiscal years 2006
through 2010.
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