GASOLINE: SUPPLY, PRICE, AND SPECIFICATIONS HEARINGS BEFORE THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED NINTH CONGRESS SECOND SESSION MAY 10 AND MAY 11, 2006 Serial No. 109-94 Printed for the use of the Committee on Energy and Commerce Available via the World Wide Web: http://www.access.gpo.gov/congress/house U.S. GOVERNMENT PRINTING OFFICE 29-387PDF WASHINGTON : 2006 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON ENERGY AND COMMERCE JOE BARTON, Texas, Chairman RALPH M. HALL, Texas JOHN D. DINGELL, Michigan MICHAEL BILIRAKIS, Florida Ranking Member Vice Chairman HENRY A. WAXMAN, California FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts CLIFF STEARNS, Florida RICK BOUCHER, Virginia PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York NATHAN DEAL, Georgia FRANK PALLONE, JR., New Jersey ED WHITFIELD, Kentucky SHERROD BROWN, Ohio CHARLIE NORWOOD, Georgia BART GORDON, Tennessee BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois JOHN SHIMKUS, Illinois ANNA G. ESHOO, California HEATHER WILSON, New Mexico BART STUPAK, Michigan JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York CHARLES W. “CHIP” PICKERING, Mississippi ALBERT R. WYNN, Maryland Vice Chairman GENE GREEN, Texas VITO FOSSELLA, New York TED STRICKLAND, Ohio ROY BLUNT, Missouri DIANA DEGETTE, Colorado STEVE BUYER, Indiana LOIS CAPPS, California GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania CHARLES F. BASS, New Hampshire TOM ALLEN, Maine JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida MARY BONO, California JAN SCHAKOWSKY, Illinois GREG WALDEN, Oregon HILDA L. SOLIS, California LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas MIKE FERGUSON, New Jersey JAY INSLEE, Washington MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin C.L. “BUTCH” OTTER, Idaho MIKE ROSS, Arkansas SUE MYRICK, North Carolina JOHN SULLIVAN, Oklahoma TIM MURPHY, Pennsylvania MICHAEL C. BURGESS, Texas MARSHA BLACKBURN, Tennessee BUD ALBRIGHT, Staff Director DAVID CAVICKE, General Counsel REID P. F. STUNTZ, Minority Staff Director and Chief Counsel (II) CONTENTS Page Hearings held: May 10, 2006...................................................................................................................... 1 May 11, 2006....................................................................................................................... 127 Testimony of: Gruenspecht, Howard K., Deputy Administrator, Energy Information Administration, U.S. Department of Energy........................................................................................... 31 Wehrum, William, Acting-Assistant Administrator, Office of Air and Radiation, U.S. Environmental Protection Agency................................................................................. 40 Sundstrom, Geoff, Director of Public Affairs, American Automobile Association .......... 87 Cooper, Dr. Mark, Research Director, Consumer Federation of America......................... 93 Wilkins, John R., Executive Vice President & CIO, Delaware Valley Wholesale Florists, on behalf of Society of American Florists....................................................... 99 Cavaney, Red, President, American Petroleum Institute.................................................... 131 Dinneen, Bob, President and CEO, Renewable Fuels Association.................................... 146 Slaughter, Bob, President, National Petrochemical & Refiners Association..................... 153 Becker, S. William, Executive Director, State and Territorial Air Pollution Program Administrators/Association of Local Air Pollution Control Officials .......................... 169 Reid, Paul D., President, Reid Petroleum Corporation, on behalf of National Association of Convenience Stores and Society of Independent Gasoline Marketers of America...................................................................................................................... 174 Shea, William H., President & CEO, Buckeye Partners, LP, on behalf of Association of Oil Pipelines............................................................................................................... 182 Conley, John, President, National Tank Truck Carriers, Inc.............................................. 192 Additional material submitted for the record: Cooper, Dr. Mark, Research Director, Consumer Federation of America, response for the record........................................................................................................................ 119 Sundstrom, Geoff, Director of Public Affairs, American Automobile Association, response for the record ................................................................................................... 120 Wehrum, William, Acting-Assistant Administrator, Office of Air and Radiation, U.S. Environmental Protection Agency, response for the record.......................................... 121 Becker, S. William, Executive Director, State and Territorial Air Pollution Program Administrators/Association of Local Air Pollution Control Officials, response for the record........................................................................................................................ 261 Cavaney, Red, President, American Petroleum Institute, response for the record............. 264 Slaughter, Bob, President, National Petrochemical & Refiners Association, response for the record .................................................................................................................. 268 Reid, Paul D., President, Reid Petroleum Corporation, on behalf of National Association of Convenience Stores and Society of Independent Gasoline Marketers of America, response for the record............................................................................... 271 Dinneen, Bob, President and CEO, Renewable Fuels Association, response for the record.............................................................................................................................. 275 (III) GASOLINE: SUPPLY, PRICE, AND SPECIFICATIONS WEDNESDAY, MAY 10, 2006 HOUSE OF REPRESENTATIVES, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. The committee met, pursuant to notice, at 10:00 a.m., in Room 2123 of the Rayburn House Office Building, Hon. Joe Barton (chairman) presiding. Members present: Representatives Barton, Hall, Gillmor, Norwood, Cubin, Shimkus, Wilson, Shadegg, Buyer, Radanovich, Bass, Pitts, Bono, Walden, Terry, Rogers, Otter, Myrick, Sullivan, Burgess, Blackburn, Dingell, Waxman, Markey, Boucher, Brown, Eshoo, Stupak, Wynn, Green, Capps, Schakowsky, Solis, Gonzalez, Inslee, Baldwin, and Ross. Staff present: David McCarthy, Chief Counsel for Energy and Environment; Margaret Caravelli, Counsel; Maryam Sabbaghian, Counsel; Sue Sheridan, Minority Senior Counsel; Bruce Harris, Minority Professional Staff Member; Lorie Schmidt, Minority Counsel; and Peter Kielty, Legislative Clerk. CHAIRMAN BARTON. The committee will come to order. The Chair recognizes himself for an opening statement. Today the committee begins two days of examining gasoline supply, price, and specifications. Just last week we completed another painful seasonal transition from winter gasoline to summer gasoline production at our Nation’s refineries. Early May is always a tough time for drivers, but this year has been especially difficult. As storage tanks have gone down with the old gasoline, prices have shot up, in some cases to all-time records. If that wasn’t enough, some people couldn’t buy gasoline at any price in their neighborhood. I know that because I was one of them up here in my condo in Arlington, Virginia. Gasoline markets are complicated. The price is driven by many factors, but mostly it is the old standby of supply and demand. We consume about 12 million barrels of fuel in the United States every day. We have invited the experts today; the regulators, the producers, the suppliers, the transporters, the retailers, and the consumers of gasoline to explain what goes on from the time a barrel of oil is brought into a refinery to the point where you and I put it in our cars and trucks at our Nation’s gas pumps. The world crude oil pricing hearing last week that (1) 2 this committee held reminds everyone that the U.S. government cannot dictate worldwide crude oil prices. Developments in other parts of the world have brought the price of crude to $75 a barrel and when that happens, there is an inevitable increase in the price of gasoline that we pay at the pump. When the price of one changes, i.e., crude oil in the world market, the price of the other, i.e., retail price of gasoline follows. More than half of the price of a gallon of gasoline is determined by the price of crude oil. Domestically, our gasoline production supply and delivery system is still recovering from the devastating effects of Hurricanes Katrina and Rita and is undergoing a major transition in gasoline formulation as we have taken MTBE off the market and are trying to replace it with either ethanol or reformulated gasoline. Coupled with this is the annual transition that I have already talked about. Most fuels move across the country inside pipelines, but ethanol and the fuels blended with ethanol can’t do that. They move in rail cars and tanker trucks. Increasing our domestic ability to produce and deliver the finished product of ethanol enhanced gasoline, America is trying to find a new way to