API-funded study lists House clean air bill's possible refining impacts

Aug. 24, 2009
US refining investments could plunge because of soaring business costs if clear air legislation which the US House passed in June becomes law, a study commissioned by the American Petroleum Institute concluded.

US refining investments could plunge because of soaring business costs if clear air legislation which the US House passed in June becomes law, a study commissioned by the American Petroleum Institute concluded.

Production at domestic refineries also could drop as oil product output in countries without similar greenhouse gas limits rises, effectively making any GHG reductions minor, API said on Aug. 24 as it released the analysis by EnSys Energy, an independent consulting firm.

“This study clearly shows the devastating impact this legislation could have on US jobs and US energy security,” API President Jack N. Gerard said. “Climate legislation should not come at the expense of US economic and energy security. Congress needs to analyze carefully the impact of any climate policy on ordinary Americans, American jobs and American companies.”

A deep US refining decline would create ripples throughout the general economy, affecting jobs beyond the oil and gas industry, he continued. “Steelworkers, construction workers, even the shop keepers, school teachers, and waitresses working in communities where refineries operate would feel the pinch,” Gerard warned.

Allowance distributions

API and other oil and gas groups have criticized HR 2454, which the House passed by 219 to 212 votes on June 26, because of the free emissions allowances it would distribute to various industries as part of its carbon cap-and-trade program.

Oil refiners would receive 2.25% of the allowances but be held responsible for 44% of total emissions, including those from their oil processing operations (about 4%) as well as consumer emissions from planes, trains, automobiles, heating oil, and other oil product uses, API said. In contrast, some other industries and businesses would receive free allowances that match or exceed their carbon reduction obligations, it noted.

The study by EnSys Energy, which has its headquarters in Lexington, Mass., warned that HR 2454, if it became law, could by 2030 cut US refining throughput by up to 4.4 million bbl a day to 12.2 million b/d, with California and Gulf Coast refineries hit particularly hard. Refining throughput in the rest of the world, meanwhile, could grow by up to 3.3 million b/d, it said.

US refining investments could drop by $89.7 billion, or 88%, to $12.2 billion by 2030, while projected utilization rates could plunge from 83.3% to as low as 63.4%, the study continued. Increased costs from complying with the new regulations would make US refineries less competitive with oil product suppliers in countries without similar carbon limits and increase US reliance on imported oil products, it indicated.

For its base case, the EnSys study used the US Energy Information Administration’s latest reference case projection of future energy liquids supply and demand without climate legislation. It also used HR 2454’s basic case allowance costs and other market impacts, and the bill’s no international/limited case allowance costs and other market impacts.

Contact Nick Snow at[email protected]