SBA ASSISTANCE FOR AGRICULTURAL CONCERNS AND TO MEET POLLUTION STANDARDS MONDAY, JULY 14, 1975 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON SMALL BUSINESS ADMINISTRATION Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. Neal Smith (chairman of the subcommittee) presiding. Mr. SMITH. The meeting will come to order. The first witness this morning is Mr. Tom Love, president of the National Oil Jobbers Council. He wishes to testify with regard to H.R. 78. We are glad to have you. Mr. Love, you may proceed. TESTIMONY OF TOM LOVE, PRESIDENT, MUSKET OIL CO., AND PRESIDENT, NATIONAL OIL JOBBERS COUNCIL; ACCOMPANIED BY ROBERT BASSMAN, COUNSEL Mr. LOVE. Thank you, sir. I am accompanied by counsel, Mr. Bob Bassman, Mr. Chairman. I am president of Musket Oil Co. in Oklahoma City and representing it this morning as president of the National Oil Jobbers Council. I appreciate this opportunity to present to this subcommittee the support of our members for H.R. 78's proposal to create a pollution control financing program for small business. The National Oil Jobbers Council is a federation of 42 State and regional trade associations whose membership includes 15,000 independent branded and nonbranded petroleum marketers. Over 95 percent of these members, wholesale or retail about 25 percent of the gasoline consumed in America. And they retail almost 75 percent of the home heating oil. Wide geographical representation and the independent small businessman's utter dependence upon the satisfaction of his customers and neighbors combine to make us particularly sensitive, not only to the Nation's commitment to a healthy environment, but also to the dislocations caused by efforts to achieve this end. Oil marketers, probably more than any other businessmen have borne, and continue to bear, a large, and I believe, disproportionate share of the cost of cleaning up our Nation's environment. For this 55-623-75- -7 reason, we heartily endorse H.R. 78 as a worthwhile beginning in the fight to preserve the viability of small businessmen faced with skyrocketing costs of environmentally motivated laws and regulations. The oil marketer's burden for cleaning up the environment is best illustrated by example. In 1970, the Congress rightfully singled out the automobile as a major source of many air pollutants. EPA then proposed the catalytic muffler as a means to alleviate this problem. The costs for this device were to be shared by all purchasers of new cars and the capital costs were to be placed on the automakers. Small business, it seemed, would not be overly affected. Unfortunately, the catalytic muffler requires unleaded gasoline, and EPA mandated most service station operators to carry unleaded. Thus these small business marketers had to make a huge investment in pumps, storage, trucks, and other equipment to handle unleaded gasoline. The average investment was $6,600 per station or $702 million nationally. This expense amounted to 6 percent of the total cost, $101,200, for the construction of an average service station. This expenditure was made solely for environmental purposes. No economic benefits have accrued to the dealer or supplier-lessor from the sale of unleaded gasoline, and none are anticipated. As a matter of fact, virtually the only sales of unleaded I have at my stations is when a self-service customer uses the unleaded by mistake. The expenditure of these funds was made by the station owners, usually refiners or independent wholesalers, if not cheerfully, at least with a resigned spirit that it was necessary to improve the environment. Now the question has been raised: Will this expenditure in fact improve the environment or will catalytic converters actually be harmful to the environment? Currently, the control of hydrocarbon vapors at service stations is under EPA study. These vapors are present in the automobile gasoline tank when a motorist drives into a service station for gasoline. They are forced into the atmosphere by the pressure of the gasoline being dropped into the tank at the station. To effectively capture these vapors, a tight seal is needed between the auto fill neck and the pump nozzle. The best way to accomplish this would be a federally mandated standardized fill pipes and pipe access on automobiles which would enable a simple balance system to recover the vapors. EPA has refused to require this standardization of fill pipes and access ways and is currently planning to require service stations to install not a simple vapor balance system at a cost of approximately $6,000, but the more complex vacuum assisted system which will cost. the small businessmen who own these stations approximately $12,000. The expenditures required for handling nonleaded gasoline and vapor recovery show the increased startup cost of any small businessman wishing to enter or stay in the gasoline business. The expenditures in these two examples alone can amount to as much as 20 percent of the total cost for setting up a service station. The increased paper work required by EPA is also a great impediment to the small businessman who must employ sophisticated and expensive assistance in order to comply. These costs are especially difficult for the small nonproducer who has no profits on crude oil to offset them. Compliance with EPA regu lations thus threatens the viability of small businessmen who have great difficulty in financing the material and personnel costs involved. Our Nation has always held that one of its greatest strengths is the upward mobility allowed by our system. This upward mobility means that an individual with intuition and initiative can come up with a better idea and turn it into a better way of life. This committee has always made efforts to preserve upward mobility by protecting the small businessman. H.R. 78 exemplifies these efforts and should be applauded. I would, however, like to suggest one specific language change. Section 404 (a) (1) defines pollution control facilities eligible under the act as property, which will abate or control air or water pollution by removing, altering, disposing, or storing pollutants. Our members' experience with installing facilities for unleaded gasoline is an example of an environmentally mandated expense that neither removes, alters, disposes, or stores pollutants. We therefore suggest that this definition be expanded, and an alternative definition is attached to this testimony for your examination. See appendix A. Thank you once again for the opportunity to testify in support of H.R. 78. [The material referred to above follows:] APPENDIX A SPECIFIC AMENDMENT SUGGESTION "SEC. 404. (a) For purposes of this section, the term— "(1) 'Pollution control facilities' means such property (both real and personal) as the Administration in its discretion determines is likely to help reduce, abate, or control air or water pollution or contamination by either removing, altering, disposing, or storing pollutants, contaminants, wastes, or heat, or any other means and such property (both real and personal) as the Administration determines will be used for the collection, storage, treatment, utilization, processing or final disposal of solid waste." Average cost to convert one sales outlet to no lead gasoline_. 1 Furnished by the National Oil Jobbers Council. 8, 700.00 11, 850. 00 14, 600.00 66,875.00 6, 687.50 Mr. SMITH. Thank you very much for your testimony. It was very much to the point and exhaustive. I assume, although you did not specifically say so, that you feel that if companies could be guaranteed that the lease that they enter into with a small businessman, say for 15 or 20 years, would be fulfilled, they would be able to furnish this equipment at a reasonable lease cost. Mr. Love. Yes, sir. Mr. SMITH. Mr. Stanton. Mr. STANTON. Thank you, Mr. Chairman. Sorry to have been late here this morning. This bill, H.R. 78 was first brought to our attention by our colleague, Mr. McFall. So we are very pleased to have your testimony here this morning. I wonder if you could clarify, as we have gotten into this, I heard just a couple of arguments against H.R. 78, and I wonder if we could have your comments on them. First, is that the bill would result in the issuance by State and local governments of several billion dollars worth of tax-exempt bonds. And this might have the tendency to flood the market for this type of investment. Would you want to comment on that? Would you agree or disagree or see some problems down the road? Mr. Love. I do not think that I would be prepared to comment on that particular rebuttal. That is really outside of our area of expertise. Mr. STANTON. The second one is, in order to make the bonds more attractive as to interest rates, it would have to be very high. This would probably be something that would be out of your field too. Mr. Love. I would think so. But, I might make the comment I would not know why, I would assume, that they would enter the bond market in a competitive posture, like any other bond. Mr. STANTON. The argument I have heard was that State and local governments would have to pay out in interest much more than the original cost. This might add a tremendous burden to the already hardpressed budgets of State and local governments. That is all, Mr. Chairman. Mr. SMITH. Mr. Corman? Mr. CORMAN. Thank you, Mr. Chairman. I have to confess my lack of preparation for this hearing. I wish you would tell me which taxes and bonds that we are dealing with. Mr. SMITH. It was brought out in earlier hearings, especially by the State of Illinois and the State of California, that some tax-exempt bonds have been issued for the purpose of helping companies comply with national pollution control standards. But as a matter of fact, something like 98 percent of the bonds have been used by big business. No one wants to lease a small businessman something on a 20-year basis. They are afraid he will not be in business that long. And so the tax-exempt bonds are not producing the capital that is needed to invest in pollution control equipment as far as small business is concerned. Big business is getting all of it. Mr. CORMAN. I suspect there is going to be a vigorous effort to do away with the tax-exempt industrial bonds, including pollution bonds. Mr. SMITH. Part of the issue here. I guess, is that big business Mr. CORMAN. If big business should have them, why should not small business have them too? I was going to suggest that that is a perfectly reasonable position to take. But I am most hopeful that the Ways and Means Committee is going to tighten up. The revenue loss is gigantic on tax-free bonds. It is disrupting the municipal and State bond mar ket. And I think we might, in addition to looking at this solution, look for some other solutions for small business. In the event that we do tighten up on the tax-free bonds, I am trying to figure out how the lease guarantee program of SBA would assist you, because there is provision for that now. Mr. LOVE. Well, for this particular matter, for the purposes of installing equipment, not only to satisfy vapor recovery requirements, but also the equipment that had to be installed to comply with the EPA requirements on unleaded, we were specifically, actually, almost written out, because as I mentioned, in my prepared testimony, the language, the SBA language provides that-it defines pollution control facilities eligible under the act as property which will abate or control air or water pollution by removing, altering, disposing or destroying pollutants. Mr. CORMAN. If we broaden the definition to go for the thing that you need, then what advantages do you get for that broader definition? What specific SBA help do you get there? Mr. Love. We would become eligible, at least, for this purpose, to apply at least to SBA for a lease guarantee and for SBA loans. At this time, for unleaded gasoline, we cannot even do that. Mr. CORMAN. Neither of those has anything to do with a tax-exempt bond? Mr. Love. No, sir. We suggest language that would remedy that in the act, in H.R. 78. We suggest language that would broaden it sufficiently to include our people, our members. Mr. CORMAN. For the tax-exempt bonds? Mr. Love. Yes, sir. But it would also provide a remedy for the lease guarantee and for SBA loans as well. Mr. CORMAN. How would you envision using tax-exempt bonds? Mr. Love. We would view this act as an instrument, primarily, for financing. The small business petroleum marketer has had difficulty in installing the unleaded equipment that is necessary to comply. So we have got some track record behind us. We know that this has presented a problem of identifiable size in complying with EPA's unleaded requirements, and we anticipate that it would be equally as great if the balance system is accepted. If it is not, and EPA is currently leaning toward the vacuum boost system, it would virtually be doubled. Mr. CORMAN. Let us get back to the financing end of it rather than the mechanical end of it. Let us say an oil jobber is going to have to make a $100,000 investment because of pollution control devices as defined in this broadened definition. Now, how is the tax-exempt bond going to come into play? Mr. Love. You can respond, if you would like to, Bob. Mr. BASSMAN. Our people, of course, are faced here with a specific proposal to alleviate the problems they have been having with raising the necessary capital to comply with EPA regulations. And the way we have read H.R. 78's proposal is that the bonds will allow the State and municipalities to purchase this equipment and lease it over longterm leases to the jobbers. What we had read into this we thought was implicit but was not stated, was that after the lease period had paid for the cost to the governmental body of the equipment, then at some |