NPRA: US refiners need sound policy for competitive edge
The US refining industry should oppose the passage of pending environmental legislation if it has questionable benefits, according to Gary R. Heminger, president of Marathon Ashland Petroleum LLC.
Heminger spoke Mar. 23 in San Antonio to attendees of the 102nd annual meeting of the National Petrochemical & Refiners Association.
Heminger identified three legislative areas that could create problems for refiners: the 8-hr ozone standard; the proposed Climate Stewardship Act of 2003 (CSA), sponsored by Sens. John McCain (R-Ariz.) and Joe Lieberman (D-Conn.); and the carbon dioxide emissions trading program.
"As an industry, we find ourselves fully engaged energetically and simultaneously on the economic, political, and geopolitical fronts," he said. "We need to cultivate a secure, strong, and viable industry here [in the US]. And we need help at the federal level. Not as preferential treatment, but in sound policy.
Ozone standard
"Consider the impact of new ozone and particulate standards. The 8-hr ozone standard will greatly multiply the amount of NAAQS [National Ambient Air Quality Standards] nonattainment areas in this country," he said.
Nonattainment means that these areas will risk a loss of federal highway funds, face difficulty in permitting new plants, and suffer possible job losses.
"Our clean fuels and new engine systems that use them will greatly aid in meeting NAAQS standards. But the clean fuels timetables are out of sync with early ozone and particulate matter compliance deadlines," he said. "Help from clean fuels will not arrive in time. And, as a result, states may pressure refiners to provide individual and haphazard solutions to their dilemma."
Heminger cited New Hampshire as an example of this pressure.
The state has attempted to create a special nonoxygenated reformulated gasoline for just four counties, contends Heminger.
"You can't make a fuel for a four-county market and recoup your investment. And even if you could, you can't retool refineries in time for sudden new state deadlines," he said. "Action at the federal level should provide rational regional solutions. And we badly need that kind of leadership from the US Environmental Protection Agency."
McCain-Lieberman CSA
The best example of bad legislation, he said, is the McCain-Lieberman CSA.
"This type of legislation should set off shock waves within our industry," he said. "It represents a sea change in the direction of energy regulation because it reduces refinery sales through a tax or fee paid on CO2 emissions.
"It would require refiners to purchase allowances for up to 100% of the CO2 content of transportation fuels sold," he said. "It would scale back the quantity sold over time to meet an arbitrary target, that is, it would ration energy. And the mandatory allowances would become the equivalent of a massive new tax on consumers."
Heminger said he feels the threat from this, or a similar bill, is "very credible" and that "there is no sense in which energy rationing will make us better, just poorer." There is another, more subtle approach to mandatory CO2 controls in the form of "credits for early reduction," he added.
Emissions credit trading
"Credit trading can add much needed flexibility to regulatory programs. For example, being able to trade credits for sulfur lends significant flexibility to the new Tier 2 program," Heminger said. "But credit trading is good only where reducing emissions is already required.
"If a company is given credits for voluntarily reducing emissions of CO2, those credits have no value at the time they are granted. They only become valuable if the emission of CO2 becomes a scarce commodity for which others are willing to pay," he stated.
Heminger said that those holding the CO2 credits will have a tremendous incentive to support mandatory controls so the credits take on value. "In fact, the simplest, most powerful way to transform a voluntary into a mandatory reduction scheme is to introduce credit trading," he said.
Refiners should support a voluntary program to reduce greenhouse gas emissions from facilities without a trading provision, which is advocated by President George W. Bush, Heminger said.
"We should support him in this effort. But we need to do more—we need to open the eyes of all the stakeholders to the benefits of the efficient use of hydrocarbons," he said.
