RITA’s AFTERMATH: Bush, Urging Conservation, Seeks to Boost Fuel Supply;

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The president stresses a need for more refining capacity. Environmental groups express worry.

Los Angeles Times

WASHINGTON, D.C. — President Bush on Monday urged Americans to drive less and embrace conservation more in the wake of hurricanes Katrina and Rita, and he said he
would work with Congress to enact incentives for energy production and refinery

The president also said that he was directing federal agencies to reduce energy consumption and that he would release oil from the Strategic Petroleum Reserve as needed to ease the shortages and price increases caused by the hurricanes.

In Congress, Republican leaders prepared to move ahead with legislation that would provide tax breaks to spur refinery construction and expansion; they also said they would consider other measures left out of a major energy bill Bush signed into law in August.

The developments underscore the extent to which Katrina and Rita have reconfigured the legislative agendas of the White House and Congress and the breadth of the storms’ effect on a domestic petroleum market that is increasingly sensitive to supply disruptions.

One measure would allow companies to write off, in the first year of operation, the cost of building a refinery, rebuilding one destroyed by Katrina or installing equipment in an existing facility to increase overall output by 5% or more. Any energy legislation also was expected to include White House proposals to make former military bases available as sites for refineries and to streamline the issuing of permits for new or expanded refineries.

More immediately, the White House said the Department of Homeland Security would extend a waiver, begun after Katrina, of a federal law called the Jones Act so that foreign-flag ships could temporarily transport fuel from one U.S. port to another. And the Environmental Protection Agency was extending waivers relaxing gasoline blending rules and diesel fuel restrictions.

Environmental groups said Monday that they were gearing up to fight a possible effort to roll back protection rules. Frank O’Donnell, president of Clean Air Watch, said Republican leaders were “racing faster than a hurricane to smash through alleged environmental barriers before anyone realizes what they are up to.”

In remarks reminiscent of Jimmy Carter’s 1977 appeal to Americans to turn down their thermostats, Bush said Monday that everyone had a role to play in responding to the back-to-back storms, which have hampered offshore oil production, refinery operations and fuel distribution in the Gulf Coast region.

“We can all pitch in … by being better conservers of energy,” Bush said after hearing a briefing at the Energy Department. “I mean, people just need to recognize that the storms have caused disruption and that if they’re able to maybe not drive… on a trip that’s not essential, that would be helpful.”

The president said he was ordering agencies in the executive branch to cut back on fuel consumption. Federal employees were being told to curtail nonessential travel, increase use of carpools and mass transit and reduce electricity use during peak hours, he said, “as a way for the federal government to lead when it comes to conservation.”

Asked whether Bush — who today takes his seventh trip to the Gulf Coast since Katrina struck in late August — would curtail his own travel to the area, White House spokesman Scott McClellan said: “It’s important for the president of the United States to travel to the region and get firsthand accounts of the operations and to provide comfort and support to those who have been affected… That’s an important responsibility of the president of the United States.”

Bush said the storms had called particular attention to the need to increase refining capacity in the U.S. He noted that no new refineries had been built since the 1970s and said excessive federal regulation had discouraged oil companies from expanding existing plants.

In addition to a lack of new construction, refining capacity has been affected by other factors. Years of heavy financial losses and a wave of mergers have wiped out many refineries, leaving the industry with only 148 fuel-making plants today, down from a peak of 324 in 1981.

In the last decade, the industry has largely offset the lost production by expanding existing plants. At the same time, refiners have spent money in recent years to comply with more-stringent environmental regulations. They have not increased production enough to keep up with the swelling demand for gasoline, diesel, jet fuel and other petroleum products.

Critics such as Jamie Court, president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, have contended that the industry resisted expansion because keeping supplies tight boosted profits.

“The answer is not more carrots for the industry, like gutting environmental laws and immunizing companies for the harm they cause, but sticks, such as forcing companies to invest in beefing up refining capacity when it is needed,” Court said.

In Congress, Republican leaders said they had not decided whether to draft another comprehensive energy bill or try to attach provisions aimed at building more refineries to a package of hurricane relief measures.

Even before Katrina hit, knocking out a good chunk of the nation’s oil refineries and driving up prices at the pump, lawmakers were getting an earful from constituents about high fuel costs. But it appeared that the hurricanes might have whipped up a favorable political climate for industry-backed initiatives that did not make it into the energy bill approved this year.

High gas prices also have emboldened pro-production lawmakers to make a push to open up coastal waters to new drilling.

Such efforts appeared unlikely to win White House support. “We have repeatedly reaffirmed our pledge to support the existing moratoria based on deference to the wishes of the states to determine what activities take place off their coasts,” White House spokeswoman Dana Perino said.

D.J. Peterson, lead author of think tank Rand Corp.’s 2003 report on the state of refining, cautioned against rushing into new laws to fix the refinery shortfall.

“You’re in a period after a significant event, and people are scrambling for solutions,” Peterson said. “What our research points out is that this is the result of long-term trends, and you can’t necessarily untangle them overnight, or with simple policy fixes.”
Times staff writer Elizabeth Douglass in Los Angeles contributed to this report.

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