Tax Incentives For Small Refiners To Reduce Emissions, Keep Diesel Fuel Price From Rising

3/19/2002

From: John McDowell of the Small Business Administration, 202-205-6941

WASHINGTON, March 19 -- Tax incentives for small refiners will help them comply with Environmental Protection Agency (EPA) rules reducing sulfur emissions. These incentives will keep them from possible bankruptcy and thus keep diesel fuel prices from rising. These results are detailed in a March 19, 2002 letter from Chief Counsel for Advocacy, Thomas M. Sullivan, to Senators Tom Daschle (D-SD) and Trent Lott (R-MS), backing sections 504 and 505 of the Energy Tax Savings Act of 2002 (S. 1979).

"It's a win-win situation," said Sullivan. "Targeted tax incentives will enable small refiners to help protect the environment while retaining a reliable, and competitive domestic refining capacity."

EPA, in consultation with the Office of Advocacy, environmental groups, and industry representatives, recently issued rules to limit the amount of sulfur in gasoline and highway diesel fuel. EPA allowed small refiners to stagger compliance with these two major regulations. However, even with a staggered phase-in, small refiners face substantially increased costs when the grace period ends.

The loss of small refiners could close five percent of the U.S. refining capacity, and result in a 10 percent increase in the cost of diesel fuel to consumers. Such a rise in diesel fuel costs would cost American consumers nearly $51 billion over the next 10 years.

However, the congressional Joint Committee on Taxation estimates that the incentives for installing pollution control devices contained in sections 504 and 505 would decrease federal revenues by only $57 million over the same ten years.

"Without these incentives, competition will be lost and ultimately consumers will pay higher diesel prices at the pump," said Sullivan. "Not only that, but we'll lose innovation, jobs, and a reliable domestic refining capacity," he continued.

For more information and the complete text of the letter, visit the Office of Advocacy website at http://www.sba.gov/advo. The Joint Committee on Taxation revenue estimate can be found at http://www.house.gov/jct/x-8-02.pdf.

------ Created by Congress in 1976, The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The Chief Counsel for Advocacy, who is appointed by the President and confirmed by the U.S. Senate, directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Issues are identified through economic research, policy analyses, and small business outreach. The Chief Counsel's efforts are supported by offices in Washington, D.C., and by Regional Advocates. For more information on the Office of Advocacy, visit http://www.sba.gov/advo, or call 202-205-6533.