Industries wary of cap-and-trade (8/16)

Posted August 15, 2009 at 10:49 pm
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By ERIC CORMIER
AMERICAN PRESS

The United States Senate will begin formal debate on the American Clean Energy and Security Act when it reconvenes next month.

The legislation, known as the “Waxman-Markey,” is touted by President Obama’s administration as a way to reduce greenhouse gas emissions and promote the creation of affordable and reliable alternative energy resources.

Basically, big industry emitters would have to get a permit for every ton of carbon dioxide released into the atmosphere from their facilities. That is explained as the “cap”.

Government and industry officials realize it would be easier and cheaper for some industry facilities to reduce emissions; therefore companies that emit less than their allowance would be allowed to sell their permits to other industry –known as “trade”.

Here in the Louisiana, the bill is being watched closely since industry insiders believe the government’s rules could be detrimental to production of oil, natural gas and chemicals.

During a telephone interview with the American Press Friday, Louisiana Chemical Association president Dan Bourne said the agency didn’t have a specific position on the bill.

Yet, he pointed out a number of items in the bill that makes Louisiana industry leaders uncomfortable.

First, he said America shouldn’t be the only country limiting emissions by manufactures.

“It is not a benefit to just have a plan in the United States,’’ he said. ‘‘Whatever is decided has to have buy-in from emerging nations like China and India, otherwise the government is just penalizing American manufacturing and refining companies.”

Borne wants to see the bill “fixed if it will be something American industry can totally embrace.”

He has concluded that it’s restrictive on the oil refining business, a staple industry in Louisiana.

“Wording in the bill that the Senate has allows oil refineries to only get 2 percent of the government’s allocations of credits under the greenhouse legislation. Most refineries would have to purchase the right to emit, and those costs would be absorbed by the company, and that could be passed on to the consumer,” he said.

That could also mean a reduction in work force at refineries since they already are seeing “razor-thin margins,’’ Bourne said.

Industry leaders said the bill doesn’t have provisions for expanded oil and gas exploration. Instead, it stresses alternative fuel development.

Bourne said creating alternative fuels is laudable, but in the shortand mid-term the country needs oil and natural gas.

Regarding the chemical sector, Bourne said higher oil and natural gas costs would add more costs to base production. He said oil and natural gas for the chemical industry is like flour for a baker.

But one of the most worrisome items in the bill is emissions baselines.

“The bill says you start with 2005 emissions. That means American industry would be capped at levels from that time period and have to reduce from then on.

“Well, that hurts Louisiana. In 2005 a very large part of the refining and chemical industry was shut down because of Hurricane Katrina and Rita. Those storms affected southeast and southwest Louisiana. If the 2005 emissions are used, that would penalize Louisiana because we weren’t at full production. We’d have to reduce emissions below 2005 which were low compared to 2004 and 2006,” Borne said.

The American Press contacted several local industries to get their opinions on the bill. Only PPG and ConocoPhillips responded.

PPG plant manager Jon Manns said he “strongly encourages members of Congress to carefully consider all aspects of the bill, particularly the adverse financial effect that this legislation will have on American families.”

Manns said the bill would heavily tax U.S. industry.

“The final bill has not been written. But, the one version we have seen would result in an additional tax of $60 million per year for the PPG Lake Charles facility. With falling caustic prices and lower sales volumes and product margins, we are already being challenged in these current economic conditions.”

ConocoPhillips issued a statement through its Lake Charles refinery.

The company expressed support for the creation of laws that address greenhouse gas emissions.

“Our major issues at this time relate to the treatment of the transportation sector within the allocation provisions of the bill. Specifically, we support the equitable treatment of transportation fuel consumers relative to electricity and natural gas consumers, fair and adequate protection for U.S. refining as an energy-intensive, trade exposed industry and full recognition of refinery complexity in the distribution of allowances among refineries,” the company states.

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