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Calendar No. 473
104th Congress Report
2d Session 104-298
PROPANE EDUCATION AND RESEARCH ACT OF 1996
June 27, 1996.--Ordered to be printed
Mr. Murkowski, from the Committee on Energy and Natural Resources,
submitted the following
R E P O R T
[To accompany S. 1646]
The Committee on Energy and Natural Resources, to which was
referred the bill (S. 1646) to authorize and facilitate a
program to enhance safety, training, research and development,
and safety education in the propane gas industry for the
benefit of propane consumers and the public, and for other
purposes, having considered the same, reports favorably thereon
with an amendment and recommends that the bill, as amended, do
The amendment is as follows:
On page 13, line 7, insert the word ``twice'' after the
purpose of the measure
The purpose of S. 1646, the Propane Education and Research
Act (PERA), is to provide the framework for propane producers
and marketers to establish a self-help, non-federal program of
research and development (R&D;), training, safety and consumer
summary of major provisions
S. 1646 allows, but does not require, the propane industry
to establish a ``check-off'' (assessment) program that would
initially collect a maximum \1/10\ of one cent per gallon of
odorized propane. These assessments cannot increase by more
than \1/10\ of one cent per year, and they cannot exceed \1/2\
cent per gallon after five years without a special referendum.
Should the propane industry avail itself of the opportunity
to establish the check-off program, a Propane Education and
Research Council (PERC) would be established to undertake R&D;,
education and safety programs using funds collected under the
assessment program. the Council would be composed of 21
members, including 9 representing producers, 9 representing
retail marketers, and 3 representing the public. Both
industrial classes must include representatives of both large
and small companies (including agricultural cooperatives).
Members must be drawn from geographically diverse regions of
There are provisions in S. 1646 to limit the administrative
overhead of the program and to provide the federal government
with reimbursements for the reasonable costs of program
In an effort to help protect consumers against any
potential increases in propane fuel costs resulting from the
legislation, S. 1646 contains provisions requiring the
Department of Commerce, using Energy Information Administration
data, to prepare an annual analysis of changes in the price of
propane relative to other energy sources. S. 1646 also contains
provisions restricting PERC activities to R&D;, training and
safety in the event that the 5-year rolling price index of
consumer grade propane exceeds the 5-year rolling average price
composite index of the other energy sources by 10.1% of
greater. Also, in the interest of consumer protection, there is
a provision in S. 1646 expressly stating that PERC may take no
action, and the ACT may not be interpreted, as establishing an
agreement to pass along to consumers the cost of the
assessment. Moreover, S. 1646 contains a provision requiring
the Secretary of Commerce to prepare a report every 2 years
examining whether operations of PERC, in conjunction with the
cumulative effects of market changes and Federal programs, have
had an effect on propane consumers. If the Secretary of
Commerce determines there has been an adverse effect, the
Secretary shall recommend changes for correcting the situation.
background and need
Propane is the fourth most used fuel in America. It is used
in 7.7 million homes in the United States for cooking, heating
and hot water. Traditionally, propane serves markets beyond the
reach of natural gas transmission and distribution lines. In
addition, it is used for agricultural purposes on half of all
U.S. farms and in a variety of recreational applications. In
addition to its use as a fuel, propane is also used as a
feedstock in many petrochemical applications. However, unlike
other energy sources such as coal, natural gas, solar and wind
energy, oil, tidal and geothermal, there is no federal R&D;
program for propane.
To fund propane R&D;, safety, training and consumer
education, the Propane Education and Research Act provides the
propane industry with the option of establishing a ``check-
off'' (assessment) program similar to those widely used for
agricultural commodities such as beef, pork and cotton. In a
check-off program, a fraction of the wholesale cost of the
product is set aside by the product producer and deposited into
a common fund that can be employed to the benefit of commodity
producers and consumers. While the focus of most agricultural
check-off programs is marketing and promotion, the emphasis of
the propane check-off program is research and development.
Under the provisions of S. 1646, a referendum may be held
by the propane industry, composed of approximately 165
producers and 5,000 retail marketers. If the industry, by a
two-thirds margin of producers and a two-thirds margin of
retailers (in terms of volume), vote to establish the program,
a Propane Education and Research Council would be established
to undertake R&D;, education and safety programs using funds
collected under the assessment program. The Council would be
composed of 21 members representing producers, retailers,
agricultural cooperatives, and the public. Any petition of 35%
of producers or retailers would force an industry referendum to
suspend or terminate the program, and the program would be
suspended if a simple majority of producers and retailers
combined, or a two-thirds majority of either producers or
retailers alone voted to do so.
S. 1646 initially limits the assessment to a maximum of \1/
10\ of one cent per gallon of odorized propane. (Because
propane is odorless, virtually all propane sold for
residential, farm, agricultural and commercial use is
``odorized'' to make it easier to detect potentially explosive
leaks. Much of the propane sold as a chemical feedstock is not
odorized, and is not directly affected by this bill.) The
assessment is made at the time of odorization, or when odorized
propane is imported.
Energy research and development activities generally
require long lead times and a level of stable funding that are
often beyond the reach of any one company. The widely
distributed nature of propane marketers, which include a large
number of very small retailers, has inhibited the creation of a
voluntary effort to cooperate on research and development
priorities. Fiscal realities make the creation of a new federal
R&D; program for propane highly unlikely. Indeed, industry
witnesses at the Committee's hearing on S. 1646 did not ask for
government grants or the creation of a government bureaucracy
to perform propane R&D.; Instead, they sought help in creating
an organization to provide R&D;, training, safety and consumer
education that was not funded by tax dollars. S. 1646 creates
the framework to accomplish this goal.
S. 1646 was introduced by Senator Domenici and 21 original
cosponsors on March 27, 1996. The original cosponsors included
Senators Ford, Dole, Lott, Heflin, Shelby, Faircloth, Simpson,
Cochran, Inhofe, Warner, Helms, McConnell, Thurmond, Burns,
Johnston, Bingaman, Nickles, Lugar, Kassebaum, Coats, and
Grams. Senators Kyl, Coverdell and Pryor were added as
cosponsors on April 15, 1996. Senator Bond was added as a
cosponsor on April 16, 1996. Senator Bumpers and Harkin were
added as a cosponsors on May 2, 1996. Senator Thomas was added
as a cosponsor on May 7, 1996. Senator Gregg was added as a
cosponsor on May 8, 1996. Senator Smith was added as a
cosponsor on May 15, 1996. Senator Hutchison was added as a
cosponsor on May 20, 1996.
Executive branch comment on S. 1646 was requested on April
4, 1996, but has not yet been received.
A hearing on S. 1646 was held before the Energy Research
and Development Subcommittee on April 16, 1996. At that
hearing, the National Propane Gas Association, the Gas
Processors Association, and Farmland Industries (a large
farmer-owned cooperative) testified in favor of the bill. The
Propane Consumers Coalition, (a coalition of residential,
agricultural and industrial propane users) expressed neutrality
on S. 1646 while noting that it had been substantially improved
from earlier House versions by the addition of the consumer
protection measurers in S. 1646.
A markup was held June 19, 1996 on S. 1646, at which time
the Committee adopted the amendment offered by Senator Domenici
as set forth elsewhere in this report and ordered the bill
reported with a favorable recommendation.
A companion measure, H.R. 1514 was introduced in the House
on April 7, 1995 by Representative Tauzin. H.R. 1514 currently
has 222 cosponsors.
In the 103d Congress, a similar measure was introduced in
the House of Representatives as H.R. 3546 on November 19, 1993.
The House Energy and Commerce Subcommittee on Energy and Power
ordered the bill reported, but the measure was never acted on
by the Full Committee.
committee recommendation and tabulation of votes
The Senate Committee on Energy and Natural Resources, in
open business session on June 19, 1996, by majority vote of a
quorum present recommends that the Senate pass S. 1646 if
amended as described herein.
Section 5(j) of S. 1646 contains a provision to ensure that
the reasonable costs of the Department of Energy's oversight of
PERC activities can be reimbursed from the collected
assessments. S. 1646 as introduced limits this reimbursement to
the average annual salary of a Department of Energy (DOE)
employee, or $58,061 in fiscal year 1996. The Committee adopted
an amendment proposed by Senator Domenici to insert the word
``twice'' on page 13, line 7, the effect of which was to double
the allowable reimbursement.
The Committee desires that DOE provide an appropriate level
of oversight for the propane program that industry may choose
to undertake, and the Committee desires that DOE's legitimate
costs be reimbursed. However, the intent of the legislation as
introduced, and the intent of the Committee, is to ensure that
DOE does not create a bureaucratic empire to accomplish the
task. The figure represented by the average annual salary of a
DOE employee multiplied by a factor of two, or $116,122 in
fiscal year 1996, represents a funding level that is sufficient
for DOE to perform adequate oversight.
Section 1--Short title
The intent of the section is self-explanatory.
The intent of the section is self-explanatory.
The intent of the section is self-explanatory.
Section 4 specifies the conditions that must be met by the
industry referenda that are required to create, terminate or
suspend the program.
Section 4(a) specifies that a two-third majority of
producers and retailers will be required to establish the
Propane Research and Education Council (PERC), and that voting
is by producers and retailers and is based on volume of propane
sold or produced in the previous calendar year. The provisions
in section 4(a) related to reimbursement of costs incurred for
the conduct of the referendum, voting rights, auditing, and
volume certification and self-explanatory.
Section 4(b) specifies the procedures to be followed in the
event a referendum is held to terminate or suspend the program.
The Propane Research and Education Council may, on its own
initiative, conduct a referendum to determine whether the
industry favors termination or suspension of the Council.
Alternatively, a termination or suspension referendum will be
triggered by a petition to the Council by producers and retail
marketers representing 35% of the volume of propane produced
and sold, respectively, in the United States. The Council will
be suspended or terminated if the suspension or termination is
approved by persons representing more than one-half the total
volume of odorized propane in the producer class and more than
one-half of the total volume of propane in the retail marker
class; or by persons representing more than two-thirds of the
of the total volume of propane produced or sold in the United
States. The provisions in section 4(b) related to the expenses
and audit of the referendum are self-explanatory.
Section 5--Propane Education and Research Council (PERC)
Section 5(a) specifies the procedures governing the
selection of the Propane Education and Research Council (PERC)
Section 5(b) specifies that PERC members shall include gas
processors and oil refiners among producers, interstate and
intrastate operators among retailers, large and small companies
in both classes (including agricultural cooperatives), and
shall represent geographically diverse regions of the country.
Section 5(c) specifies the composition of the PERC and the
qualifications of its members. The Council's 21 members shall
consist of 9 producers, 9 retailers, and 3 public members. PERC
members may not be an employee of a qualified industry
organization or industry trade association as defined in the
Act, nor may a Council member serve concurrently as an officer
or the Board of Directors of same. Only one person from any
company or its affiliate may serve on the Council.
Section 5(d) specifies that Council members will not
receive compensation for services or reimbursement for expenses
with the exception that public members, upon request, be
reimbursed for reasonable expenses related to PERC meetings.
Section 5(e) specifies the term length of PERC members.
Council members shall serve 3 years terms, no more than 2
consecutive terms, and no more than 7 consecutive years for
members filling unexpired terms. Former members may return if
they have not served for 2 years. Initial PERC appointments
shall be made for terms of 1, 2, and 3 years, and shall be
staggered so 7 members are selected each year.
Section 5(f) specifies the Council's functions; namely, to
develop programs for safety and training, research and
development of propane utilization equipment, public safety
education and other issues associated with propane.
Section 5(g) specifies that at least 5% of funds collected
shall be used to benefit the agriculture industry, and that the
use of those funds shall be coordinated with organizations
representative of the agriculture industry. In addition, this
subsection specifies that the percentage of funds used for
projects relating to propane as an over-the-road motor fuel
shall not exceed the percentage of the total propane market
currently used as a motor vehicle fuel, based on a 3 year
Section 5(h) specifies that the Council shall give priority
to R&D;, safety, education, and training in the development of
programs and projects.
Section 5(i) relates to administrative matters including
the selection of a chairman and officers, the creation of
committees, the adoption of rules and bylaws, and the
solicitation of industry comment and recommendations.
Section 5(j) specifies that the Council's administrative
costs shall not exceed 10% of total funds collected in any
fiscal year. Section 5(j) also provides for the reimbursement
of the Secretary of Energy for Expenses related to the
oversight of PERC activities, not to exceed an amount that is
twice the average annual salary of DOE employees.
Section 5(k) requires that PERC publish a budget plan for
public review and comment. Following that public review and
comment, the PERC shall the provide its budget to the Secretary
and Congress. The Secretary may recommend programs or
activities to the PERC.
Section 5(l) outlines requirements for recordkeeping and
public access to Council records. Section 5(l) also requires an
audit to be conducted at least once each fiscal year, and
specifies that copies of audits shall be made available to
qualified industry groups, members of industry and members of
the Council upon request. Section 5(l) also requires the
Council to provide the Secretary of Energy with notice of
meetings, and provides the Secretary of Energy with the
authority to require the Council to report on its activities
and on compliance, violations and complaints regarding the
implementation of the Act.
Section 5(m) specifies that PERC meetings shall be open to
the public and shall require 30 days advance public notice.
Section 5(m) further specifies that all the Council's meeting
minutes shall be made readily available to the public.
Section 5(n) requires PERC to submit an annual report of
past and planned projects and programs, and the allocations and
planned allocations of Council resources for each program and
Section 6 provides the general authority for the Council to
levy an assessment on odorized propane. The initial assessment
shall be no more than one mill (\1/10\ of one cent) per gallon
of odorized propane sold and placed into commerce. The
assessment may not be raised by more than \1/10\ of one cent
per year, and shall not exceed 5 mills (\1/2\ of one cent)
after 5 years unless approved by a majority of those voting in
a referendum in both classes.
Section 6 also specifies that the owner of odorized propane
at the time of odorization, or at the time of import of
odorized propane, pays the assessment at the time propane is
sold or placed into commerce. Exports are not assessed.
Section 6 also provides that PERC may establish alternative
means of collection and establish penalties for failure to pay.
Section 6(d) specifies that the Council may only invest
undisbursed assessments in U.S. obligations, obligations of a
state or political subdivision, accounts or Certificates of
Deposit in Federal Reserve Member banks, or obligations fully
guaranteed by the United States.
Section 6(e) specifies that PERC shall coordinate with
State programs by joint or coordinated assessment, reduced
assessment, or rebate. The reduction of rebate shall be no more
than 20% of the regular assessment and shall be paid only to
the State PERC or similar entity.
Section 7 specifies that the PERC may bring a civil action
in a United States district court to compel compliance with
assessments levied under the Act, and that a successful action
to compel compliance may require the defendant in such actions
to pay the costs of the compliance action.
Section 8--Lobbying Restrictions
Section 8 disallows the use of any funds collected by the
Council for political activities or to influence legislation.
However, the Council may recommend changes in the Act or other
statutes that would further the purposes of the Act.
Section 9--Market Survey and Consumer Protection
Section 9(a) directs the Secretary of Commerce to prepare
an annual analysis of changes in the price of propane relative
to other energy sources using data from the Energy Information
Administration and other public sources. The price analysis
shall compare indexed prices of consumer grade propane against
the price of residential electricity, residential natural gas,
and refiner price to end users of No. 2 fuel oil on an annual
national average basis.
Section 9(b) restricts PERC activities to R&D;, training and
safety programs if in any year the 5-year rolling price index
of consumer grade propane exceeds the 5-year rolling average
price composite index of other specified energy sources in an
amount greater than 10.1%.
The intent of the section is self-explanatory.
Section 11--Relation to other programs
The intent of the section is self-explanatory.
Section 12 requires the Secretary of Commerce to prepare a
report every 2 years examining whether operations of PERC, in
conjunction with the cumulative effects of market changes and
Federal programs, has had an effect on propane consumers.
Section 12 also requires the Secretary of Commerce to consider
whether there have been long-term and short-term effects, and
changes in the proportion of propane demand attributable to
various market segments. If the Secretary of Commerce
determines there has been an adverse effect, the Secretary
shall recommend changes for correcting the situation.
cost and budgetary considerations
The following estimate of costs of this measure has been
provided by the Congressional Budget Office.
Congressional Budget Office,
Washington, DC, June 26, 1996.
Hon. Frank H. Murkowski,
Chairman, Committee on Energy and Natural Resources, U.S. Senate,
Dear Mr. Chairman: The Congressional Budget Office has
reviewed S. 1646, the Propane Education and Research Act of
1996, as ordered reported by the Senate Committee on Energy and
Natural Resources on June 19, 1996. Based on information from
the Natural Gas Processors Association and the National Propane
Gas Association, we estimate that enacting this bill would have
no net impact on the federal budget. However, enacting this
bill would affect both direct spending and receipts; therefore,
pay-as-you-go procedures would apply.
The bill does not contain any intergovernmental mandates as
defined by Public Law 104-4. The bill would impose a private-
sector mandate on owners and importers of odorized propane sold
for commercial use.
Bill Purpose: S. 1646 would authorize propane industry
organizations to conduct a referendum among producers and
retail marketers to determine if a Propane Education and
Research Council should be established. If there is sufficient
industry support, this Council would be established to promote
enhanced safety, training, research and development, and safety
education in the propane gas industry. The Council would
initially be funded through an assessment of up to one-tenth of
1 cent per gallon of propane sold in the retail market, and the
assessment could subsequently be increased to as much as one-
half of 1 cent per gallon. Funds collected through this
assessment would be available to fund the Council's programs
without further appropriation by the Congress. The bill would
allow the propane assessment to be changed or terminated if
there is sufficient industry support.
Federal Budgetary Impact: For purposes of this estimate, we
assume that the industry would vote to establish the Propane
Education and Research Council, and that the propane assessment
would initially be set at one-tenth of 1 cent per gallon of
propane sold. CBO believes that the cash flows related to the
Propane Education and Research Council should appear on budget
as governmental receipts and direct spending because these
transactions would stem from exercise of the sovereign power of
the federal government. Based on recent industry data on the
amount of propane sold in the United States retail market
(about 9 billion gallons annually), we estimate that this
assessment would result in governmental receipts of at least $9
million a year. (Receipts would be higher if and when the
assessment is increased.) We assume the Council would expend
whatever funds are raised each year, so that enactment of this
bill would have no net budgetary impact.
Mandates Statement: The bill does not contain any
intergovernmental mandates as defined in Public Law 104-4. It
might result in increased funding for state propane education
and research councils because the Council could opt to transfer
a portion of the assessments it collects to these state-level
This bill would impose a private-sector mandate on owners
and importers of odorized propane sold for commercial use. The
mandate would be imposed if the propane producers and retail
marketers vote favorably in a referendum to establish a Propane
Education and Research Council. Assuming the Council initially
sets the assessment at one-tenth of 1 cent per gallon of
propane sold, the annual direct cost of the mandate would be
approximately $9 million, well below the annual $100 million
threshold established by Public Law 104-4. Even if the
assessment is subsequently increased to the maximum possible
rate (one-half of 1 cent per gallon), the mandate cost would
remain below the threshold.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Kim Cawley
(for federal costs), Stephanie Weiner (for revenues), Pepper
Santalucia (for the state and local impact), and Jean Wooster
(for the private sector impact).
June E. O'Neil, Director.
regulatory impact evaluation
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out S. 1646.
This bill affords the propane industry with the
opportunity, but not the obligation, to establish a self-help,
non-federal program of research, development,, safety, training
and consumer education activities. Thus, the bill is not a
regulatory measure in the sense of imposing Government
established standards of significant economic responsibilities
on private individuals and businesses.
No personal information would be collecting in
administering the program. Therefore, there would be no impact
on personal privacy.
Little if any additional paperwork would result from the
enactment of S. 1646.
Executive Branch comment was requested on April 4, 1996. No
response has been received by the Committee.
changes in existing law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee notes that no
changes in existing law are made by the bill S. 1646, as