San Antonio, Texas (Platts)--23Mar2009

US refiners remain viable in the current economic downturn, due in part
to production cuts that are expected to continue, as the industry is tested by
the economy and policymakers, said officials with the National Petrochemical &
Refiners Association, on Sunday.
NPRA President Charles Drevna and NPRA Chairman Kevin Brown both spoke
during a press conference ahead of the start of the NPRA annual meeting, which
has seen attendance drop in 2009 by about 12-14% from 2008 due to the tough
economic climate, they said.
Both officials made comments that revealed tensions between the new Obama
administration and the refining industry.
Brown said policy issues facing the industry include "mandates and
increased taxes as the government looks for new sources of revenue," while
Drevna said some in the new administration and Congress are using the industry
as "a piggy bank."
"We look forward to working closely with the new administration - we have
to," said Drevna. "Solutions" to the US' "energy challenges" include a diverse
fuel mix and policies that back a reliable supply of petroleum-based products,
he said.
Drevna said the Obama administration would be taking "the wrong path" in
seeking to make the US energy independent, which could lead to "isolationism"
and restrict needed supplies. "Energy independence should never be confused
with energy security," said Drevna.
The refining industry has been very vocal about its unhappiness with any
sort of federal mandates, especially for government-subsidized biofuels, which
it says are not readily available to meet growing targets and that face
scientific uncertainties as far as their usage is concerned. The Obama
administration has come out in favor of increased renewable fuels use.
"Sure we're cutting capacity right now," said Brown, adding that "if you
look at our industry, nobody's jumping up and down and asking for subsidies or
some other form of financial assistance."
Drevna said Valero Energy "made an economic decision" when it bought
ethanol plants last week from bankrupt VeraSun Energy, becoming the first US
refiner to have a significant amount of ethanol production capacity. He would
not comment on whether other refiners would be seen snapping up ethanol makers
and said "each individual company has to look at what their needs are."
While he said the NPRA favors a mix of fuels, it does not think current
targets for increased blending of biofuels are reasonable.
"We still think that the market-based approach is the best way to go for
fuels. We're going to use a lot of ethanol, we're going to use a lot of
biofuels...Our problem is when we're mandated how much, where and when to use
it," said Drevna.
He said the NPRA remains opposed to raising the ethanol blend level above
10% (E10) and that if the ethanol industry wants that level raised it must
"accept the responsibility of the liability" of its use. He cited the "200
million" vehicles with car warranties that only cover E10, as well as possible
problems with power and marine equipment and "environmental degradation."
"When they're ready to do that, I think we'll probably back off," he
said.
In a rare move, the NPRA has barred the press this year from the
government relations breakfast at its annual meeting, with Drevna citing the
need for an "open discourse" among its members and several legislators
scheduled to appear.
According to the program, there will be a panel discussion with "moderate
democrats" at the breakfast to discuss "energy and chemicals policies they
expect to see front and center in 2009" as well as "how the nation's refining
and petrochemical industries should interact with the House of Representatives
during the first year of the 111th Congress."
The panel includes: Representative Henry Cuellar, Democrat-Texas (member
of the House Homeland Security Committee); Representative Gene Green,
Democrat-Texas (member of the House Energy and Commerce Committee);
Representative Charles Gonzales, Democrat-Texas (member of the House Energy
and Commerce Committee); and Representative Ciro Rodriguez, Democrat-Texas
(member of the House Appropriations Committee).
"If 'change' is coming to Capitol Hill in 2009, these are the legislators
that will be at the forefront of those changes," says the program.
--Beth Evans, beth_evans@platts.com