- The Washington Times - Friday, June 16, 2000

House Speaker J. Dennis Hastert and Midwestern legislators Thursday called on the Environmental Protection Agency to amend or suspend regulations they say have driven gas prices to more than $2 a gallon in the region.

The legislators contend that the gas-price spike in Chicago and Milwaukee where some high-grade blends of gas are selling for $2.50 a gallon is the result of bureaucratic foot dragging by the EPA.

They said the agency failed to deliver on promises it would give the region credit for burning cleaner ethanol-blended fuels before imposing the regulations on June 1.

According to an internal congressional briefing paper obtained by The Washington Times, quick action by the EPA administrator would enable Midwestern refiners to increase their blending stocks by 25 percent to 35 percent and reduce gas prices in Chicago by about 15 cents a gallon.

That is close to the 16-cent premium city residents have been paying above prevailing national prices. The EPA already granted a temporary three-week waiver to St. Louis earlier this month.

The price spike in the Midwest is being blamed in part for the pressure on gas stocks and near-record gas prices being experienced all over the country. Some analysts say the Midwest problem could spread to the East Coast, where prices for the reformulated gasoline needed to comply with the EPA rules have been edging up.

The EPA, Energy Department and Federal Trade Commission have been seeking to pin the blame for the high gas prices on oil companies and refiners in the Midwest.

And they are investigating whether the companies are illegally price gouging. Thursday, the White House also announced an investigation into whether disruptions in the transportation of oil supplies are at fault.

After a meeting with Mr. Hastert, Illinois Republican, and Midwestern legislators on Capitol Hill Thursday, EPA Administrator Carol M. Browner said that granting their request would not solve the problem. She once again cast blame on oil refiners.

"Oil companies owe people an answer as to why prices are higher," she said.

Sen. Russell D. Feingold, Wisconsin Democrat, said the meeting didn't result in any short-term relief from the EPA. "That's a shame," he said. "The bottom line is consumers are really getting the shaft in the end."

Mr. Hastert, who originally called the meeting to bring Mrs. Browner to account for a promise he says she made in April to amend the regulations to give credit for the cleaner-burning Midwestern fuel, appeared persuaded after the meeting that oil companies may be part of the problem. He said he would meet with several companies on Capitol Hill next week to demand an explanation.

"We don't know the answers," Mr. Hastert said. "What we do know is our people in our area of the country are paying more out of their wallets." He said that the prices started going up when the regulations went into effect, and added that Republicans have been trying to get EPA to act for months.

During the meeting, aides say legislators demanded that Mrs. Browner immediately provide the ethanol credit or, short of that, temporarily suspend the Clean Air Act "Phase II" regulations to give consumers a reprieve on prices while refiners replenish the extremely short supplies of reformulated gasoline that have caused the price spike.

Pump prices in Chicago have surged 55 percent since January to $2.13 a gallon on average, much more than what consumers pay in other cities subject to the strict new clean-air rules. Prices in Baltimore, Boston, Houston, Philadelphia and Los Angeles average less than $1.50 a gallon, the EPA says.

Illinois Gov. George Ryan, a Republican, said the EPA can't simply shift the blame for the problem after dawdling for months over measures that could have prevented it.

"While the goal of the federal reformulated gasoline program cleaning pollution from our air is laudable, the EPA went ahead with these new production rules too quickly and they disregarded its impact on consumers," he said.

"Gas prices are just outrageous," he said. "When it costs you $40 to fill your tank, you don't have much left in your pocket. The price increases directly coincide with the new EPA rules."

Mr. Ryan said the governors of Indiana, Kansas and Nebraska also want a temporary suspension of the regulations.

Oil analysts say the problem in the Midwest is the result of a combination of adverse developments that came together at once, including a rise in crude-oil prices on world markets to near-record highs that the EPA could not have anticipated when it proposed its regulations four years ago.

Special factors in the Midwest also have driven up prices, including stoppages at two pipelines that feed oil to Chicago and Milwaukee. On top of that, they say, the cost of the reformulated gas is much higher than EPA expected because the recipe has been caught up in a patent dispute in the courts.

Many refiners put off building their stocks until crude-oil prices dropped this spring, and some held off creating stocks of the reformulated gasoline on the promise that EPA would approve the ethanol credit, the analysts said.

"A bunch of things came together in an extremely tight situation. The problems in the market magnified the impact on prices," said Ron Gold of PIRA Energy Group in New York.

The Organization of the Petroleum Exporting Countries next week may agree to release another half-million barrels of crude oil a day on the world market, analysts said, but that will not do much to satisfy demand in the United States or bring down sky-high gas prices caused by the reformulation bottleneck.

"There's not much other there in the immediate future that's going to modify the situation except an EPA waiver," said Mr. Gold. "You always need some safety valve for these kinds of things."

• Sean Scully contributed to this report.

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