By Keith Reid
Thee 2014 midterms came as a shocking rebuke to the Democrats, and it has been posed that it was specifi- cally more of a rebuke to the Obama Administration’s policies. We are also entering in to a new year with a new legislative make up. FON Interviewed PMAA President Dan Gilligan about the recent election and what’s on the docket for 2015, including his retirement after 28 years on the job.
FON: That was some midterm election, wasn’t it?
Gilligan: It’s gotten tiresome—going to hearings and nothing getting done and everybody in a malaise. It’s finally going to, maybe, be fun again. It’s nice to actually have things in the queue to work on and fight over.
FON: How do you see the shift to Republican control in the Senate playing out with our industry concerns?
Gilligan: Certainly Congress is going to be a much friendlier entity to fossil fuels in the next two years. It’s no secret that the Obama administration is very hostile toward fossil fuels, and is doing everything within their executive powers to diminish the consumption of fossil fuels. It would be hard to argue with that if we had a decent alternative fuel that could simply replace fossil fuels, but we don’t. We just can’t get there with solar panels and windmills. And they know that. Their answer is not the lower the cost of solar and windmills, but to increase the cost of fossil fuels. They believe that if you make fossil fuels more expensive, then gradually people are going to invest in these alternatives. And they have been doing a pretty good job, though lately I’m sure they’re not happy with $77 per barrel crude oil.
FON: While the legislative branch might be more favorable to fossil fuels, with a basic Republican majority the president still holds the veto pen. Do you think enough Democrats will cross over to override a veto on some of these issues?
Gilligan: Without a doubt. I think there are 12 to 14 Democrats up for reelection next cycle that are in purple states, and they can probably be picked off one by one. The big question is when you are fighting a veto you have to get the 67 votes, which means you have to pick up 12 Democrats. If it gets to 55 Republicans—and even if Mary Landrieu wins—you can pretty much bet that on energy issue she is going to support them. I do think, off hand, there are one or two issues where you can get close to a 67 vote to override a veto.
One issue that comes to mind is the 40-hour full- time work week. The stats I’ve seen indicate a dramatic increase in workers going from full-time to part-time, and that’s 100% because of Obamacare and the 30 hour definition and a push [by employers] to 29 hours. So you might actually round up enough votes to change that definition of full time back to 40 hours. Obama may threaten a veto, but I can see where you could maybe get 67 votes on that. The opponents would say they’ll just give the workers 39 hours instead of 29, but that’s still better for most workers. Many of those workers who had one full-time job now have to work two part-time jobs to make ends meet.
FON: Do you see Congress showing some backbone in the face of agency actions at EPA, etc.?
Gilligan: One thing Congress can do is limit funding for these, and that really can slow things down and I think you are going to see Congress slow down some of these programs. But then it’ll come down to Obama blaming Congress on shutting down the government, and that they don’t want clean water or clean-air. But I do think there will be some additional backbone shown.
FON: What do you see happening with the RFS?
Gilligan: What is kind of funny is when looking at the RFS, was that one of the worries [on the Republican side] was that you were going to have a gasoline spike right before election, and not only did you not have a gasoline spike you had a 20% drop three weeks before the election. And it still didn’t benefit the Democrats.
The RFS is not a partisan fight, Senators from Iowa, South Dakota, North Dakota and the like staunchly defend their ethanol industries as it’s a giant subsidy to those corn producing states. So I don’t see any real statutory change on the forefront.
I think the biodiesel mandate is essentially noncontrover- sial. I know refiners don’t like it and are opposed to it, but there is a lot of capacity so I don’t think that is as big of an issue and there’s room for the biodiesel mandate to grow.
The ethanol mandate has been the real knockdown drag out fight. In September when DOE said we think gasoline consumption is going to increase next year that let EPA off the hook. EPA Administrator Gina McCarthy can pacify the ethanol lobby by taking it up a little bit, without having the petroleum lobby screaming bloody murder that they’re going to scrap the gasoline marketplace.
One thing we worry about is that if there was some reform in the works, there are some people who say that anyone that blends ethanol or biodiesel should be counted as an obligated party. If you blend a million gallons this year, then you have to plan on a million gallons next year and you become obli- gated just like the refiners are. Obviously, we would be very opposed to that.
FON: So when are we going to see EPA set the RFS figures?
Gilligan: In my 28 years in Washington I don’t think I’ve ever seen anything like this where deadlines mean nothing. It’s just crazy. They still haven’t decided what the mandate is for 2014, and were almost done with the year. It’s just an embarrassment to the agency they that they just can’t seem to get this done in a timely manner. I’m not criticizing the people who work over there—they are pretty diligent about trying to get stuff done—but there are so many fingers in the pie that it’s impossible to get those things done, sometimes.
FON: What else do you see making waves for the industry?
Gilligan: On the heating oil side getting NORA reauthorized was a big deal, but we didn’t get all of what we wanted. Wewanted to get a longer reauthorization and we wanted NORA to have more flexibility in some of the things they are doing. So I think we’re going to be back in there. Any a bill that is moving, I think we are going to add in some small amendments and maybe get a few more years of reauthorization. We will be looking at that all year long.
We will also probably be supporting American Fuel & Petrochemical Manufacturers and some of the other groups calling for a Jones Act [which prohibits any foreign built or foreign flagged vessel from engaging in coastwise trade] reform, which is critical for heating oil folks in the Northeast. Being able to move product from the Gulf to the Northeast in winter is very important, and the fact that you have to use a Jones Act accept- able tanker continues to be a problem.
With motor fuels, the underground storage tank rules are at the Office of Management and Budget now. We’re going to meet with them next week, and we’re really hopeful that EPA listens to the comments and the perspectives that were offered on trying to root out some of the unnecessary costs.
We gave them some ideas on how to achieve equivalent environmental protection without the added costs and bells and whistles. Once the numbers came out and it looked to be close to $7,000 per gas station as an annual compliance increase, we told EPA that they needed to do the required small business analysis. And they resisted, and said no. So if they put out the proposed rule without a consideration of small businesses that will probably have to go to court. I’m hoping EPA comes up with a reasonable rule where everyone says, yeah, we don’t like it, but it’s not bad and it’s achievable. It’s not going to put any gas stations out of business.
The revised ozone standards is another big deal, and not just for us but the entire country. If EPA does the worst, Yellowstone will end up in nonattainment. It’s hard to believe, but it’s absolutely true. Once they start tightening down the ozone standards the reformulated gasoline markets will expand, perhaps doubling, and right there you’re talking a dime a gallon in most cases. That is certainly a concern.
I’m going to guess that they are going to lower the current standard, and they might keep at it 70ppm or whatever the number is, but even that is going to be costly. But it’s not going to be deadly costly. Now that the election is over those things they are going to get done before they leave, but maybe they will make some mistakes and give lawyers something to go to court over—which is always the hope.
FON: On a personal note, you’re going to be taking it easy a bit starting next year.
Gilligan: On March 30 the new PMAA president will be named. We hope to have that person in the office by May 1, and I will stick around on a part-time basis as an advisor to the new president to brush over where all of the land mines are buried. And then, I will be put out to pasture. We all strive to get to that point where we can walk out the door, instead of being thrown out the door.