NPRA's Drevna: Climate Bill Would Have Profound Implications

NPRA's Drevna: Climate Bill Would Have Profound Implications
Few have been as vocal in articulating the downstream oil and gas industry's position on the Waxman-Markey climate change bill as Charles Drevna.
The Waxman-Markey climate change bill working its way through the legislative process has elicited strong objections from the energy community. Few have been as vocal in articulating the downstream oil and gas industry's position on the matter as Charles Drevna.

"Weíre very concerned about the negative impacts this legislation would have not just on domestic refining and petrochemical businesses, but on American consumers and our nationís economic recovery as a whole," said Drevna, President of the National Petrochemical and Refiners Association (NPRA) in Washington, D.C.

"Anything that will negatively impact supply or the cost of energy will impact consumers, so itís a false assumption that only industry will have to bear the burden of complying with a stringent, unrealistic climate change mandate," continued Drevna. "Both our employees and our customers will be adversely affected should such legislation be signed into law."

Elected to his current post in 2007, Drevna has developed expertise in energy, environmental, and natural resource matters over his nearly four-decade career. In the corporate world, he has held executive and supervisory positions with Sunoco and Consolidated Coal Corp., respectively. He has also held high-level positions with the Oxygenated Fuels Association and the National Coal Association. Drevna holds a bachelor's degree in chemistry from Washington and Jefferson College and has completed graduate-level work at Carnegie-Mellon University.

A Less Balanced Playing Field

One of NPRA's major concerns is that Waxman-Markey, which would establish a system under which various industries would trade a set number of credits to emit carbon dioxide (CO2) from their facilities, would penalize refineries on two levels. "Refiners, in particular, are targeted doubly by the bill -- for not only their direct, facility greenhouse gas emissions, but also for emissions from the use of the fuels they produce," Drevna explained.

The NPRA president also contends the legislation, ironically, benefits refiners in countries with more lax environmental regulations at the expense of U.S. refiners. A key beneficiary would be the Indian refining industry, which is expanding its fuel export capabilities and would not be subject to Waxman-Markey mandates. In fact, India has repeatedly rejected calls by other countries to regulate CO2 emissions.

"American refiners already face stiff foreign competition in the global marketplace," Drevna said. "Indian businesses, for example, are building refineries specifically geared toward the U.S. market. Such foreign refiners, whose operating costs are much lower and whose emissions are not addressed in the bill, will gain a distinct advantage over our own American businesses in the marketplace."

Drevna predicts that Waxman-Markey would drive refining jobs from the U.S. to countries with no greenhouse gas regulations and far less stringent overall environmental standards. He added that such a move, in turn, would likely counteract any air quality benefits on a worldwide scale. "As a result, both global greenhouse gas emissions and levels of 'traditional' pollutants will likely increase," he said.

Europe's Experience

The European Union, which implemented its own cap-and-trade system after ratifying the Kyoto Protocol in May 2002, serves as an emissions trading case study. The system, which has been in place since 2005, has been criticized for failing to meet emissions reduction targets.

Based on the terms of the Kyoto Protocol, the major industrial countries within the EU -- the "EU 15" -- were supposed to reduce their CO2 emissions to 8 percent below 1990 levels by 2008. In October 2008, the European Environmental Agency predicted these countries would in fact release 5 percent more greenhouse gas emissions into the atmosphere in 2010 than they did in 1990. In testimony before the House Ways and Means Committee this past March, the chief economist with the American Council for Capital Formation (ACCF) reported the likelihood is low that the EU will reach its goal of lowering these emissions by 20 to 30 percent from 1990 levels by the year 2020.

"While Europeís cap-and-trade scheme was severely flawed from the outset, as evidenced by the collapse of the European carbon market, the fact is that European nations are faced with the reality that they cannot meet their current targets without sacrificing their economies and jobs," Drevna said.

A cap-and-trade system also would create a new multi-trillion-dollar commodities market virtually overnight. The commodity in this case would be the right to emit carbon dioxide (CO2) in the form of emissions allowances. The Obama Administration has projected the price of these carbon credits to be between $13 and $16 per ton of CO2. According to figures from the U.S. Department of Energy's Energy Information Administration, the U.S. Environmental Protection Agency, the Massachusetts Institute of Technology, and others, the credits could easily cost three times that approximate amount. "The implications of this are enormous, and we simply canít afford to repeat Europeís mistakes on a much larger scale in the United States," said Drevna. "If weíre to be a leader in reducing greenhouse gas emissions, does it make sense to follow a failed European approach?"

Not To Be Overlooked

Although Waxman-Markey would add a new dimension to air quality regulations for industry, Drevna pointed out that NPRA's constituency boasts a solid record of lowering releases of hazardous air pollutants (HAPs) and toxic chemicals listed in the EPA's Toxics Release Inventory (TRI) database. Citing the EPA's 2008 Sector Performance Report, he said that oil refineries and chemical manufacturing plants achieved lower overall HAPs and TRI releases during the period 1996-2005. "Overall TRI air emissions from the sectors studied were reduced by more than 300 million pounds per year," he said.

Drevna also noted that EPA found the petroleum refining sector's normalized emissions of all TRI substances had declined 36 percent from 1996 to 2005 despite a six-percent increase in production from these facilities during this period. "During the same period, normalized emissions of HAPs declined 50 percent," he added. "EPA also found that from 1996 to 2005, value of shipments of U.S. chemical manufacturers increased 51 percent but the chemical manufacturing sectorís normalized emissions of all TRI substances declined 61 percent from 1996 to 2005. During the same period, normalized emissions of HAPs declined 64 percent."

"We're quite proud of the industry's accomplishments in reducing emissions," Drevna concluded.

Matthew V. Veazey has written about the oil and gas industry since 2000. Email Matthew at mveazey@rigzone.com

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