US refining investments could plunge because of soaring business costs if clear air legislation that the US House passed in June becomes law, a study commissioned by the American Petroleum Institute concluded.
Production at US refineries also could drop as product output rises in countries without similar greenhouse gas limits, effectively making any GHG reductions minor, API said on Aug. 24 as it released the analysis by EnSys Energy, an independent consulting firm based in Lexington, Mass.
"This study clearly shows the devastating impact this legislation could have on US jobs and US energy security," said API Pres. Jack N. Gerard. "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," Gerard said.
A deep US refining decline would create ripples throughout the general economy, affecting jobs beyond the oil and gas industry, Gerard said, adding, "Steelworkers, construction workers, even the shopkeepers, school teachers, and waitresses working in communities where refineries operate would feel the pinch."
Allowance distributions
API and other oil and gas groups have criticized HR 2454, which the House passed June 26 by a 219-212 vote, because of the free emissions allowances it would distribute to various industries as part of its carbon cap-and-trade program.
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.
EnSys warned in the study that HR 2454, if it were to become law, could by 2030 cut US refining throughput by as much as 4.4 million b/d 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 as much as 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 product suppliers in countries without similar carbon limits and increase US reliance on imported 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.
