|
Testimony of
William M. Flynn, Vice President
New York State Energy Research and Development Authority
before the
United States House of Representatives
Sub-Committee on the Coast Guard and Marine Transportation
March 29, 2000
17 Columbia Circle· Albany, New York 12203-6399 ·
(518) 862-1090 · fax (518) 862-1091
Chairman Gilchrest, Congressman DeFazio, distinguished committee
members, and guests. On behalf of Governor Pataki and the
residents of New York State, I want to thank you for the opportunity
to testify today regarding the role that the United States
Coast Guard played in helping New York consumers meet their
energy supply needs this past winter.
There is not another state in the union that relies on heating
oil more than New York to meet its heating needs. Forty-three
(43%) percent of New York's households use oil for space heating.
That's 2.9 million households, making New York's residential
sector the largest consumer of heating oil and kerosene, or
distillate fuels, in the nation. New York State accounts for
20% of the total U.S. distillate demand.
Furthermore, New York consumes more than 5.6 billion gallons
of gasoline, and nearly 1 billion gallons of diesel fuel annually.
This data highlights the importance that New York consumers
place on the timely resupply of petroleum products to meet
the State's heating and transportation needs.
While record setting petroleum prices in the Northeast attracted
national attention these past few months, I want to focus
on the role that the Coast Guard's ice breaking activities
played in helping protect the public health and safety of
New York residents, as well as consumers in western Massachusetts,
Connecticut and Vermont who are served by New York oil terminals.
From November through February, New York's residential, commercial,
and industrial customers consume on average 13.1 million gallons
of distillate fuel per day. At its peak in January, demand
hit a high of approximately 17 million gallons per day.
A small portion of that demand was for kerosene, which is
an important fuel in the Northeast. Kerosene is used as a
blending agent for heating oil and diesel fuel to prevent
gelling and improve viscosity in low winter temperature, with
a relatively small amount being used for space heating purposes.
Kerosene aside, when you look at the enormous amount of daily
distillate fuel use, you can begin to see the huge economic
impact as well as the critical role of transporting these
fuels throughout the Northeast.
The primary method to move petroleum products throughout
the Northeast is water-borne transport including coastal tankers
and barges. Keeping these vessels moving is vital because
the petroleum industry no longer maintains large product inventories.
The petroleum industry, like other industries, has adopted
"just in time re-supply" of inventories. This change
in industry practice that developed over the last several
years has had a large impact in New York. According to New
York State Department of Environmental Conservation data,
New York's total petroleum bulk storage capacity has declined
by 15% and our heating oil storage capacity has declined by
nearly 20% over the past five years. Additionally, over this
same period, in-state storage capacity for gasoline fell by
over 17%.
I understand that New York State is not alone in seeing its
storage capacity decline. There are several reasons for this
decline in New York, those being the high costs associated
with meeting more stringent environmental regulations, increasing
insurance and carrying costs to hold petroleum products, and
the lack of market incentives to build and maintain new facilities.
This decline in storage capacity and inventory makes the
Coast Guard's ice-breaking mission even more critical to ensuring
that petroleum products are in place when they are needed.
NYSERDA, New York's agency with primary responsibility for
energy emergencies, annually meets with personnel from the
United States Coast Guard Activities New York station prior
to the start of the heating season. We review ice-breaking
procedures and establish lines of communication to track the
movement of products in New York Harbor, on the Hudson River
and into Long Island Sound.
Coast Guard Activities New York maintains five ice-breakers
that work in New York Harbor and on the Hudson River. Two
of these ice breakers, the Penobscot Bay and the Sturgeon
Bay are 140 footers, while the Hawser, Line and Wire are 65
footers. While the main purpose of these assets is ice-breaking
activities, they also perform other functions worthy of mention
such as Search and Rescue, Maritime Law Enforcement, and Port
Safety and Security to name a few.
The primary source of petroleum products for eastern New
York, southern Vermont and western Massachusetts and Connecticut
are the oil terminals located on the 150- mile stretch of
the Hudson River from New York Harbor to Troy, New York. Eastern
New York and the western region of New England, with a population
of 4.1 million, have nearly 650,000 homes heated with petroleum.
These oil terminals, which supply a major share of the region's
heating oil, are also important sources of kerosene, diesel
fuel, jet fuel and gasoline.
Quoting Governor Pataki, "New York is no stranger to
adversity" During the past few years New York has seen
nature's forces take a toll on our State with floods, ice
storms, and other natural disasters. Those crisis situations
have helped the State refine its emergency response capabilities
and this most recent threat to the health and safety of our
residents was no different.
New York's emergency response was immediately initiated when
we were contacted by industry officials about the impending
home heating oil shortage. Governor Pataki directed NYSERDA,
the State Emergency Management Office, the Public Service
Commission, and the Consumer Protection Board to establish
an around-the-clock coordinated effort. Telephone hotlines
were established immediately to handle emergency calls for
shelter or heating assistance and to report suspected instances
of price gouging. State officials began contacting county
energy emergency coordinators across the State to assess their
local situation. Daily calls were placed to dealers to assess
supply problems and price trends. Heating oil distributors
were also supplied with emergency contact information for
their customers in the event they experienced a shortfall
in supply.
Daily contact with the U.S. Coast Guard also was established.
There is a rich history of cooperation between New York State
government and the US Coast Guard dating back to the 1930's.
Former New York Governor and then President Franklin D. Roosevelt,
issued an Executive Order in December of 1936 that directed
the Coast Guard to "...assist in keeping open to navigation
by means of ice breaking operations ...channels and harbors
within the reasonable demands of commerce." (Executive
Order 7521, December 21, 1936) Since that time, Coast Guard
ice-breakers have provided critical support to the everyday
activities in New York Harbor and along the Hudson River as
far north as Green Island, near Troy, New York.
Coast Guard Activities New York ice-breaking assets, the
larger 140foot ice -breakers and the smaller 65- foot vessels,
perform different functions. The 140 foot vessels are used
to open and maintain the main shipping channels, while the
65- foot vessels break ice in shallow water close to docks.
Since 1963, the 65- footers have provided this unique and
critical service of breaking-ice close to docks. We realize
that these vessels are getting old. However, their mission
is more critical today then when they went into service nearly
40 years ago. Less storage capacity and greater demand for
petroleum products have made it so.
The Coast Guard reports that between mid-December and mid-March
over 509 million gallons of petroleum fuels were delivered
by 274 barge deliveries to oil terminals along the Hudson
River. These deliveries represented an increase of nearly
6% as compared to 1999. Heating oil comprised over 131 million
gallons of this total. We estimate that these products had
a retail value of over $750 million.
To put these volumes and deliveries into perspective, we
estimate that it would have taken over 46,000 separate truck
loads of product to transport the same volume of fuel that
was shipped by barge this season.
More importantly, the Coast Guard ice-breakers were a vital
element in ensuring the timely re-supply of these terminals.
The Coast Guard ice breakers helped to keep the Hudson River
and New York harbor navigable. The Coast Guard was also called
on over 90 times to free tugs and barges that were stuck,
unable to move their needed oil cargoes to market.
The 65-footers have the unique ability to ice-break near
docks in shallow water because of their 8 foot draft. Because
of ice build up like that experienced this past winter, the
65- footers were invaluable because they were able to break
ice close to docks, thereby enabling petroleum barges to enter
the docking area and unload fuel. The 65 footers also perform
another extremely important function. They are able to break-up
ice packs near the mouths of streams flowing into the Hudson
River to prevent flooding. Failure to provide this type of
relief could result in flooding of low-lying areas upstream.
The 140-foot ice- breakers with their deeper draft are unable
to perform this type of flood relief activity.
From New York State's perspective, we are concerned that
Congress has mandated that the Coast Guard cut its budget
this Fiscal Year and that the funds for the 65- footers are
in jeopardy. While some may view the 65- footers as low- priority
assets that are under-used and that their current mission
can be fully covered by other existing resources, we respectfully
disagree. Although these vessels are old, they provide an
essential service that no other vessel can provide. We understand
that it costs about $1.2 million annually to operate all three
65- footers, We believe this is a small price to pay for the
public health and safety of the 4.1 million residents that
rely on some form of petroleum product to meet their heating
and transportation needs.
We respectfully urge Congress and the Coast Guard to dedicate
funding for these vessels in the next Fiscal Year as well
as in the years to come.
It is also imperative that consideration be given to funding
the design and construction of the next generation of shallow-draft
ice-breakers to replace these 65- footers.
On behalf of Governor Pataki and the citizens of the State
of New York, I would like to thank you for the opportunity
to testify today. I would be happy to answer any questions
you may have.
|
