July 13, 2007

Energy Solutions Must Include Refining Capacity

By Congressman Joe Pitts

Drivers in the Midwest and elsewhere experienced a peculiar phenomenon recently at the gas pump.  Despite relatively stable crude oil prices, the cost of a gallon of regular unleaded gas shot up by as much as 40 cents in some areas, virtually overnight.

Toledo, Ohio resident Dawn Moore put it this way to a reporter from the Toledo Blade: “It’s ridiculous.  What’s the reason behind it?  That’s what I’d like to know.  There can’t be a good reason.  It’s insane.”

She’s right.  There aren’t many good reasons – only several bad ones.  One particularly poor reason for price instability at the pump is our insufficient capacity to refine crude oil into gasoline here at home. 

A new oil refinery hasn’t been built in the U.S. in more than 30 years.  That means existing refineries must constantly operate at capacity, leaving very little margin for error.  A major refinery in Indiana recently had to shut down a 235,000 barrel-per-day processing unit, accounting for the steep price spike felt by Dawn Moore and millions of her fellow drivers.

Unfortunately, this is nothing new.  The nation learned the tough consequences of our limited refining capacity when Hurricanes Katrina and Rita struck the Gulf Coast in 2005.  The Gulf area is home to nearly half of America’s refining capacity.  When hurricane damage wiped out about 10 percent of that capacity, gas prices increased from coast to coast.

Our nation’s failure to build new refining infrastructure over the last three decades means that no matter how much crude oil is made available, the U.S. simply does not have the capacity to refine it.

The government has played a role in this failure.  The web of regulations and red tape that oil companies must navigate creates a serious disincentive to expanding refining capacity. 

I have recently reintroduced legislation (H.R. 2279) aimed at cutting through some of this red tape.  My bill would eliminate one significant hurdle that developers must clear before building a new refinery: finding land.  Specifically, it would direct the President to identify three military bases already slated for closure by the Base Realignment and Closure (BRAC) Commission that would be suitable for locating new oil refineries.

This legislation passed the House in October 2005 as an amendment to a larger bill.  Unfortunately, the bill stalled in the Senate and the legislative session expired before it was able to become law.

Recent events like the supply shortage in the Midwest, however, show that this issue hasn’t gone away.  High gas prices have gotten the attention of the American people, prompting politicians to take the issue seriously.

The result has been an array of new energy ideas.  I believe the solution will require a comprehensive strategy that includes several of these ideas.  This includes expanding domestic oil production as well as promoting alternative and renewable energy technologies.  But, I believe it must also include the expansion of domestic refining capacity.

My legislation is not a cure-all for the energy challenges we face now and in the future, but it is certainly a step in the right direction.  Combined with other good ideas, it has real potential to reduce the volatility of gas prices.  And that’s welcome news to the American consumer.

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