API says Waxman-Markey will bring misery to refiners

The climate change bill would increase U.S. dependence on overseas refiners and generally smack the Gulf Coast refining business around, according to a study released by the American Petroleum Institute.

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You see a refinery. API sees a soon-to-be orphan. (F. Carter Smith/Bloomberg)

The analysis by consulting firm EnSys Energy of the “American Clean Energy and Security Act” (aka Waxman-Markey, aka HB 2454) says U.S. refining throughput could fall by 25 percent (4.4 million barrels per day) and investment in U.S. refining could fall by as much as 88 percent, by 2030.
The basic argument is this: With U.S. refiners required to pay for the cost of the carbon in the fuels they produce, profits here would be smaller and the incentive to invest in the facilities less. Instead refineries overseas — presumably where there would be no charge for carbon — would instead start shipping finished products to us because they would become cost-competitive.
The study uses a lot of worst-case scenario predictions, such as no development of cleaner emissions technologies and no development of an international market for offsets – emissions credits created by lowering emissions through other projects overseas or in other industries. We have yet to see a counter-point by supporters of the bill, but there were a few offered up last week to the broader claims made by the National Association of Manufacturers in an anti-climate change study.
That API would put out such a study is no surprise. The message at the API sponsored Energy Citizens rallies was simply “kill the bill.” But the release from API makes a point of noting how the refining industry is required to take on a greater burden of emissions versus other industries, that receive more free credits upfront (an issue we talked about a bit last week).
And in an interview with the WSJ API President Jack Gerard says “Equity is really what we’re asking for.” It seems to suggest it’s all about coming to the table with a stronger hand when the Senate takes up the bill in the coming weeks.

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