Waxman-Markey Climate Bill To Harm US Refining Industry -Study
By Angel Gonzalez, Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Proposed federal legislation aimed at curbing global
warming would drastically reduce domestic fuel production and could potentially
double U.S. demand for imported oil products, says a new study commissioned by
the American Petroleum Institute as part of its effort to combat the landmark
climate bill.
The report's findings, which are expected to be released Monday, project that
by 2030, U.S. refining throughput could drop 17% from today's levels if the
currently envisioned climate bill is enacted and widespread nuclear power,
carbon-capture technologies and the use of international offsets fail to
materialize.
The gap would be filled by foreign refiners and the U.S. would end up
importing 19.4% of its fuel, twice as much as it would otherwise require in the
absence of the climate law, said the study undertaken by Lexington, Mass.,
consultancy EnSys Energy for API, the U.S. oil industry's main trade group.
The projections come as the U.S. Senate gears up to discuss its own version of
climate-change legislation this autumn following the House passage of a landmark
bill sponsored by Reps. Henry Waxman, D-Calif. and Ed Markey, D-Mass.
The Waxman-Markey bill, which narrowly passed in June, caused uproar among
refiners, because it makes them accountable for nearly half of U.S. carbon
dioxide emissions, while receiving only about 2.25% of total emissions
allowances. The electricity-generating sector, a major source of greenhouse-gas
pollutants, obtained a much larger share of the allowances.
"Equity is really what we're asking for," said API President Jack Gerard in a
phone interview.
Last week, API and other groups kicked off a 19-state campaign to stir
opposition against the climate bill in energy- and manufacturing-intensive
heartland states. The Congressional Budget Office has estimated that the cost of
the legislation would be minimal, but opponents, armed with a raft of recently
published studies, say that it will cost jobs and make energy pricier.
Refiners, already dogged by weak profit margins due to the recession and by
many analysts' predictions that U.S. gasoline demand is past its peak, feel
singled out by the Waxman-Markey bill.
Refineries in coastal areas would be hit especially hard by the proposed
limits, the study said.
The U.S. Gulf Coast, which houses the country's largest refining complex and
has massive ports equipped to import fuel products, would bear both "the full
brunt" of competition posed by foreign refiners, and the impact of higher energy
prices on U.S. gasoline demand, said EnSys consultant Martin Tallett.
Small refiners in the Rocky Mountains, however, are likely to see little
impact from the pollution controls as they have the right to special emissions
allowances not available to larger refiners, and are more isolated from imports,
Tallett said.
Throughout the U.S., refinery-run rates would drop to 12 million barrels a day
in 2030, from about 14.5 million barrels a day currently, if carbon-capture
technology and a working system of international offsets fail to develop, and
nuclear power and renewables don't get a major boost from current levels.
In the absence of the Waxman-Markey bill, U.S. throughput rates would average
16.4 million barrels a day in 2030, according to the study.
The report pegs the annual cost of emissions permits for U.S. refiners at $336
billion by 2030.
Annual investments in U.S. refining could drop by 88% to up to $89.7 billion,
the study said. Refinery utilization rates could drop to 63.4%, from about 83%
today.
-By Angel Gonzalez, Dow Jones Newswires; 713-547-9214;angel.gonzalez@
dowjones.com
(Susan Daker contributed to this story.)
(END) Dow Jones Newswires
08-24-090016ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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