US climate change bill would hamper US refinery
exports: study
Washington (Platts)--24Aug2009
US refineries would see their output and ability to export to foreign
markets drop over the coming decades because of a climate change bill
that
passed the House of Representativesthis summer, the consulting firm
EnSys
Energy said in a study released Monday.
The American Petroleum Institute commissioned the report just days after
the cap-and-trade legislation passed the House in late June. One key
finding
in the study is that while total US oil consumption drops, the US would
have
to import a larger portion of its petroleum products because of a
weakened US
refining base imposed by carbon caps.
The EnSys study finds that, by 2030, between 12-and-14.9 million b/d of
oil will be refined in the US should the bill become law. That would be
a drop
from the anticipated 16.4 million b/d under no carbon caps, when
accounting
for anticipated growth in the US refining base.
It also finds that 14% to 19.4% of refined products would be imported
with carbon caps in 2030, while it would be 9.6% with no carbon caps.
Martin Tallett, president of EnSys, said that oil use would decrease
under all carbon cap scenarios because of higher costs and increased
automobile fuel efficiency and increased use of biofuels. But he added
that a
major impact would be that US refiners would only be able to provide
refined
products for the US market and not be able to export abroad as they do
now
because of competition from foreign refiners unburdened with similar
costs.
The cap-and-trade bill is the work of House Energy and Commerce
Committee
Chairman Henry Waxman, Democrat-California, and it would reduce US
emissions
80% relative to 2005 levels by 2050. The plan doles out free emissions
allowances to various sectors of the economy, partly to ease economic
transition for different sectors but also to receive votes in narrow
219-212
House vote.
The bill allocates 2.25% of the free emissions allowances under the
program in the early years to refiners, while 43% of the emissions
covered
under the bill come from refining and the use of their products, EnSys
said.
The firm added that the drop in US refining will not only aid foreign
refineries but will result in emissions shifted abroad.
The EnSys study says the utilization rate for US refineries would be
83.3% in 2030 with no carbon caps while it would be reduced to between
63.4%
and 78.1% with carbon caps.
The Energy Information Administration said in April that the utilization
rate would be 77.6% under business as usual in 2030, but the EnSys
report
takes into consideration greater domestic capacity in the future,
Tallett
said.
Environmental groups responded to the study by saying it works against
API's intentions because it shows less oil ultimately being used.
Andy Stevenson, a finance analyst with the Natural Resources Defense
Council's Center for Market Innovation, said the industry's concerns
over
dropping utilization rates show that less oil is being used, which is a
purpose of the carbon cap.
The study also shows that Gulf Coast refiners, which make up nearly half
of US refining capacity, would be affected significantly. In 2030, 7.7
million
b/d of oil would be refined in the Gulf Coast with no carbon caps, while
5.1-to-6.8 million b/d would occur with carbon caps.
The Senate is expected to take up its own climate change bill this fall,
and President Barack Obama supports efforts to create a national
cap-and-trade
system for greenhouse gases.
--Alexander Duncan,
alexander_duncan@platts.com
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