Climate-change legislative outlook still uncertain, experts say

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, June 8 -- Prospects for congressional passage of climate change legislation in the wake of BP PLC’s oil spill in the Gulf of Mexico remain uncertain despite President Barack Obama’s call for action, experts at Deloitte LLC’s 2010 Washington energy conference said on June 7.

“There are only 65 legislative days left until the November elections,” said Gregory M. Scott, executive vice-president and general counsel at the National Petrochemical & Refiners Association, during a session on climate change legislation. “Politicians won’t want to impose that kind of pain on their constituents.”

“We hope policymakers won’t rush to react,” added Karen A. Harbert, president of the Institute for 21st Century Energy at the US Chamber of Commerce, who was on the same panel. “Their actions now could be felt for decades. I think most voters understand this, even in the wake of this oil spill. They’ll have to bite the bullet and legislate for the long term instead of for a 24-hr news cycle.”

“The challenge shouldn’t be underestimated. Every single US job is based on affordable, reliable energy. We can’t ignore that,” observed a third panelist, US Energy Association Pres. Barry K. Worthington. “I’m not sure we can build the legal and regulatory framework where investors would be willing to take on the liabilities.”

But Joseph A. Stanislaw, an independent senior advisor on energy and sustainability at Deloitte, said a climate-change bill could get through Congress if Obama puts the kind of weight behind it that he put behind health care reform legislation. “The administration’s coming into play on this is significant,” he told reporters at a luncheon. “If its leadership is strong, we’ll see something happen.”

‘Establish framework’
“No climate bill is going to be perfect,” suggested Branko Terzic, Deloitte’s energy and resources regulatory policy leader. “Even if it’s the wrong price, it would be better than no prices because it would at least establish a framework. We’d get the infrastructure and mechanisms in place, with people, software, and trading floors pointing the way forward.”

Outcry over the oil spill probably has improved a climate bill’s chances, he added. “It has caused people to think about the relationship between energy and the environment,” said Terzic. One possible result could be that future developers of any major industrial or civic project will be required to provide contingency plans for highly damaging events, even if those events are considered very unlikely, he said.

“It’s intensified and emotionalized people’s feelings about the environment,” Stanislaw said. “Any energy source will be questioned—even wind and solar. Everything will be closely scrutinized.”

During the climate-change session, Harbert said one reason the US does not have a national energy policy is that there are 13 federal agencies and 26 congressional committees trying to formulate it. The bill developed by Reps. Henry A. Waxman (D-Calif.) and Edward J. Markey (D-Mass.) and passed by the House in June 2009 was promoted as providing certainty, but there were so many mandates and exemptions in its 1,400 pages that it did the opposite, she maintained.

She also suggested that the US Department of Defense, as the nation’s single biggest energy customer, should take an active part in developing new fuel and electricity regulations. Congress also should address environmental and permitting problems that have led to 380 stalled or canceled projects, many of which were from renewable sources, over the last 3 years, she added.

Toolbox not full
“Energy jobs are not being created because we’re incapable of getting anything built in this country,” said Harbert. “Our toolbox is not full yet. We don’t have the technology to meet our goals. I think it’s astonishing that we don’t have a research and development tax credit for new technologies.”

While crediting US Sens. John F. Kerry (D-Mass.) and Joseph I. Lieberman (I-Conn.) and their staffs for reaching out to refiners as they tried to develop compromise legislation, Scott said that their proposal improved some aspects of the Waxman-Markey bill but left other problems in it unsolved.

“They moved the enforcement point to the terminal rack level,” the NPRA official said. “It’s an improvement, but one for the refining industry that’s a choice between lethal injection and the electric chair.”

He and Harbert expressed concern over impacts if the Obama administration’s 6-month deepwater drilling moratorium lasts longer. “The number of jobs that would be lost is very worrisome to many companies,” she said. “Workers are already being laid off and projects are being canceled. We need to be prepared if it goes on.”

“My concern is that the gulf oil spill will turn the clock back 20 years,” said Scott. “The domestic refining industry needs supplies from the US deepwater offshore and from Canada. If it doesn’t get them, more refining will take place overseas and US dependence on crude oil imports will become dependence on imported petroleum products.”

Contact Nick Snow at nicks@pennwell.com.

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