01 December 2004 21:09 [Source: ICIS news]
WASHINGTON (CNI)--The National Petroleum Council (NPC) said Wednesday that near term ?xml:namespace>
The NPC delivered a report and recommendations on refining capacity and inventory issues today to US Energy Secretary Spencer Abraham, who said tight US refining capacity is “a serious issue” that demands prompt Congressional action.
NPC, a privately-funded advisory council to the Department of Energy (DoE), said in its report today that in the near term it “does not foresee significant hurdles to the availability of gasoline and heating oil supplies to meet demand.”
But refining industry officials of NPC warned that in the longer term, the picture is worrisome. The NPC report notes that “domestic refining capacity increased over the last decade, but the rate of growth has slowed recently and has not kept pace with demand growth.” While the US had some 325 refineries in 1980, the shut-down of older and inefficient refineries in the last 25 years has left the US with just 150 refineries with less overall capacity than in 1980. US imports of gasoline from Europe,
NPC said industry investment in new refining capacity has been lacking and even discouraged by economics and regulatory issues. The advisory group noted that refining industry returns on investment are below the S&P 500 average, and that refiners face an array of regulatory uncertainties that discourage investment in costly new refining capacity.
Uncertainties over how federal new source review (NSR) regulations and national ambient air quality standards (NAAQS) among others will finally take shape, said NPC, make it difficult for refiners to commit hundreds of millions of dollars to a new refinery that could take four years to complete. In addition, said NPC, those same regulatory uncertainties mean that banks and other financial institutions are reluctant to underwrite capacity investments.
NPC urged Abraham and the Bush administration to accelerate NSR reforms and final action on NAAQS, and the group also asked that the Environmental Protection Agency (EPA) work with the refining industry to adjust EPA tolerance measures for the mid-2006 deadline for ultra-low sulphur diesel (ULSD) fuels.
In addition, NPC said prospects for increased
Abraham told the NPC meeting he is confident that the energy bill will finally emerge from Congress in the new year.
Without specifically naming ethanol, NPC also warned that Congressional subsidies for alternative fuels “increase uncertainty and reduce the incentive for investment in additional
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