NPRA's Drevna expresses concern over cap-and-trade bill's provisions

US refiners have serious concerns about proposed climate change legislation's ability to support new technologies for reliable, affordable and clean energy fuels, a leading petroleum trade association's president told Congress.

A law to address climate change should set a realistic carbon reduction target without political preconceptions or punitive provisions, National Petrochemical and Refiners Association President Charles T. Drevna told the House Energy and Commerce Committee on Apr. 24.

It also should protect affected US industries and the jobs of their employees from foreign competition in countries whose governments do not constrain carbon dioxide emissions; not mandate contradictory or redundant policies; establish a single federal program which supersedes other federal, state and local programs and statutes, and not give any form of energy an advantage over others with respect to carbon constraints, he testified during the third full day of hearings on proposed cap-and-trade legislation.

"A rather rudimentary description of the petroleum refining process, but one that must be achieved in order to facilitate technological and commercial success, is the rearrangement of the links between and among hydrocarbon molecules . . . There are more consequential links, as well: the link between energy and economic strength for the entire nation, and the link between energy and American security," Drevna maintained.

He said that the essential question is whether the proposal which US Reps. Henry A. Waxman, the committee's chairman, and Edward J. Markey (D-Mass.), who chairs the committee's Energy and Environment Subcommittee, released on Mar. 31 will strengthen those links or create adverse impacts not just for refiners but the general economy.

'One chance'

"The answer to this question must be fully investigated, understood and documented before enactment of any legislation. Most likely, we have but one chance to get it right. The nation simply cannot afford anything short of complete understanding," Drevna told committee members.

International participation also is critical to ensure that any US carbon reduction program actual reduces global emissions while protecting the domestic economy's competitiveness, he continued.

"One ton of CO2 emitted in Columbus, Ohio, is indistinguishable from one ton emitted in Beijing, Mumbai or Moscow. Any legislation enacted must contain robust provisions to prevent leakages of both jobs and emissions. Without international participation, any US carbon control measures would have little or no impact on global greenhouse gas emissions," Drevna said.

Another witness said that the Alliance of Automobile Manufacturers, which represents 11 car and light truck producers accounting for 80% of annual US vehicle sales, was still analyzing the Waxman-Markey legislative draft. But Dave McCurdy, the group's chief executive, said that it lays out a basic framework to address climate change which aligns with the alliance's core principles for such a program.

"The long-term viability of any program will depend on a technologically and economically sustainable transition to cleaner sources of energy and utilize market-based measures to the greatest extent possible. Such a program should [provide incentives for] rapid development and deployment of advanced technologies while delineating appropriate roles for federal, state, and local governments," he said in his written statement.

Comprehensive approach

McCurdy said that the Waxman-Markey draft takes a comprehensive GHG emissions reduction approach which includes transportation, utilities, energy suppliers, utilities, and consumers. "Importantly, the draft caps emissions upstream at the fuel source, which allows for the broadest possible coverage and also will result in clear price signals that encourage conservation and [provide incentives for] businesses and consumers alike to invest in clean energy technologies," he said.

"Making carbon dioxide the common denominator for future competition between completely different fuel options and power-train technologies stimulates innovation as it provides transparency to the consumer, who in turn can choose the appropriate technology for his or her individual mobility needs," McCurdy added.

He said that the proposed transition from some free allowances to a full auction addresses political issues associated with the move to a carbon-capped world while establishing a clear path to a system where incremental carbon costs are passed through. The transparency of these costs is particularly important in transportation, where manufacturers expect energy providers to pass through the market price of carbon, he said.

McCurdy said that while scheduled reductions in the emissions cap are very challenging during the early years in the proposed legislation, its provision for offsets and a strategic allowance reserve provides a mechanism to contain costs. Automotive manufacturers are concerned about whether these mechanisms will be enough to ensure the program's long-term economic and political viability, he said.

"It is also critical to avoid excessive energy price volatility. Rapid increases and decreases in energy prices make introducing new low-carbon technologies and fuels exponentially more difficult and risky, particularly in our industry where long lead times are required. We would encourage Congress to ensure that a final bill include robust provisions to address price volatility, including self-implementing triggers to avoid inflation due to higher-than-expected energy prices," McCurdy told the committee.

Contact Nick Snow at [email protected]