STATEMENT FOR THE RECORD - MICHAEL C. BURGESS

ENERGY AND COMMERCE LEGISLATIVE HEARING

Discussion Draft of H.R. "Boutique Fuel Reduction Act of 2005"

June 7, 2006

Mr. Chairman, thank you for convening this hearing this morning. And thanks to our panelists for coming before us today.

As we have learned through a series of hearings over the last few months, there are a number of factors that contribute to high gasoline prices, including crude oil prices, tight refinery capacity, and environmental regulations.

Last week, we passed legislation on the floor that would increase domestic oil supply by allowing oil and gas exploration in ANWR.

Later today on the floor we will consider legislation that would streamline the permitting process for new fuel refining capacity by eliminating needless bureaucratic delay and giving federal courts the authority to keep projects on schedule.

And here this morning, we will examine a discussion draft of legislation that seeks to reduce price spikes associated the environmental premium imposed on the price of gasoline by boutique fuels in a time of supply disruption.

Non-federal fuel specification requirements reduce the fungibility of gasoline, especially in a supply shortage situation. That means that gasoline that can be used in Lubbock cannot be used in Fort Worth. Gasoline used in Utah cannot be used in Chicago. This limited inability to move gasoline across the country in response to local demand results in increased prices at the pump.

In my home State of Texas, we willingly produce oil and gasoline to send to our friends in the Northeast because they don't make those things for themselves. But we pay more per gallon at the pump because of our generosity. The emissions from our refineries have a negative impact on our air quality, which means we must fill our tanks with more-expensive reformulated gasoline.

Studies have shown that air quality has an impact on public health, and as a physician, public health is paramount to me. I am certainly not suggesting that we reduce our air standards in order to lower the price of gas. But we should employ some common sense. It does not make sense to have 15 different approved fuels in use across the country, as EPA indicated in their May 31st report.

The Government Accountability Office has said that boutique fuels add anywhere between three tenths to 3 cents per gallon of gasoline. While this may not seem like a lot, with gasoline at $3.09, this can add up very quickly.

A supply shortage in one of the "fuel islands" created by the use of boutique fuels, is exacerbated by the area’s inability to import fuel from a neighboring area, which can lead to price volatility, commonly referred to as “price spikes”.

In addition to increased prices at the pump, the logistical complications of transporting and distributing boutique fuels to the "fuel islands" could intensify supply shortages if the source of the fuel is not nearby.

In North Texas recently, the logistical problems associated with the transition between MTBE and ethanol caused price spikes that make gasoline in the Dallas Fort Worth area some of the most expensive in the country.

In EPAct, we capped the number of boutique fuels to that number already approved by the EPA; with this discussion draft, we are looking to reduce the number of boutique gasoline fuels in use across the country.

I am looking forward to hearing from our panelists about the approach taken in the discussion draft and I'd like to thank you all for taking the time out of your busy schedules to be with us today.

Mr. Chairman, I yield back.