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As discussion of the Lieberman-Warner Climate Security Act begins in the Senate, opponents of the bill continue to make the case for why they believe implementation of the bill will negatively affect the U.S. economy. During today's OnPoint, Charles Drevna, president of the National Petrochemical and Refiners Association, explains why he believes the price of gas will likely go up if this bill passes. Drevna highlights how the Lieberman-Warner bill will affect the petrochemical and refining industries and points to a measure being discussed in the House as a better option for emissions reduction. He also explains why now, considering the current economic climate, is not the best time for the Senate to be taking up this bill.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Charlie Drevna, president of the National Petrochemical and Refiners Association. Charlie, thanks for coming on the show.
Charles Drevna: Thanks for having me. It's a pleasure to be here, Monica.
Monica Trauzzi: Charlie, NPRA just released a new report on the impacts of the Lieberman-Warner climate bill, on the refining and petrochemical sectors. And one headline, probably the most newsworthy coming out of the Memorial Day recess is that the bill would likely make filling up your gas tank more expensive than it already is. How high do you think the price of gas could go with implementation and passage of this bill?
Charles Drevna: Well, Monica, the report that we had done for us by NERA, the National Economic Research Associates, projects out over a number of years, as the bill does, as to what the impact would be. And it's over $0.50 a gallon just in today's dollars, you know, 15 or 20 years from now. But when we look at the Lieberman-Warner bill, we just can't focus on gasoline as energy. We have to look at the total energy picture and the impact that the Lieberman-Warner bill will have ultimately on all forms of energy in the United States.
Monica Trauzzi: And you're saying what, that it's too expensive to reach those emission reduction goals by using all these different forms of energy?
Charles Drevna: Well, what this bill does is create a system where having GDP growth negative will impact jobs and at the same time export greenhouse gas emissions. Now, we have to look at this thing as a global kind of endeavor. It is global climate change, at least as it is coined. If we do something unilaterally here in the United States that will send our economy into an economic tailspin, meanwhile the rest of the world does nothing, the only people who are going to benefit from this are the folks in China, India, and other developing countries. We have to look at this thing holistically. We have to finally look at ourselves collectively in the USA mirror and say, "We have to develop energy policy, environmental policy, and economic policy together." They're intertwined whether we like that or not. We can't do this in a silo anymore. This bill doesn't do that.
Monica Trauzzi: OK. So, on the gas prices, why do they go up?
Charles Drevna: Well, if you look at what has to transpire in order for my sector, the refining industry, to get the reductions required by the Lieberman-Warner bill, it will cost upwards of 620 some billion dollars for just the refining sector. Now, in order for us to keep that figure at $624 billion there are a lot of things that have to happen. We have to have 70 new nuclear units at 34 or 35 different facilities at a cost of $14 to $16 billion per. We have to have the additional windmills of over 2 million acres. Now, let's put 2 million acres in perspective. That's three times the size of Rhode Island that we have to find land to put windmills on. We have to increase biofuels by sevenfold, biofuel plants by sevenfold. At the same time, even with carbon sequestration, which we don't have yet, with carbon sequestration coal generated electricity from over 50 percent to near 30 percent. Without carbon sequestration we no longer can use coal as a natural resource to generate electricity. These are the kind of things that really haven't been taken into account on the Senate side of the Capitol. Now, compare and contrast that with what they're attempting to do, when I say they, Chairman Dingell and subommittee Chairman Boucher on the House side, they are trying to, again, look at this thing holistically. Not that we're probably going to agree with everything that they come up with, but at least Chairman Dingell and Chairman Boucher are soliciting input from a variety of stakeholders, looking at what the art of the possible is, looking at jobs, looking at the overall economy, looking at worldwide impacts. Those are the kind of things that we have to do as a nation before we do what we consider a very politically expedient bill as the Lieberman-Warner bill is.
Monica Trauzzi: So, is it irresponsible for the Senate to be discussing this at this point, considering our current economic status?
Charles Drevna: I think it's not responsible to propose and promote legislation without understanding the full economic, environmental, and social impacts that that legislation, if enacted, will ultimately cause. Those are the kinds of things that should be discussed before proposal, before debate on the legislation. I think the American people deserve policies that are well thought out and not politically expedient. We've termed this bill and we stick by it, we've termed it all cost and not benefit.
Monica Trauzzi: Some people may be rolling their eyes right now saying, "Oh, the oil and gas industry, they're worried about their profits." I mean is that true?
Charles Drevna: At the end of the day, yes, we worry about our shareholders. We worry about the viability of our companies. But who are our companies? They're 401(k)s. They're you'll are 401(k). They're pension plans throughout the country. It's the consumer who ultimately bears the brunt of bad policy and we're just saying take a deep breath, work out at it holistically. Look at all the aspects of climate change; economic, social, environmental. Talk about it in the open, intellectually honest discussion and debate, not, well, we're going to do cap and trade because Europe has done it. We can tinker with it. We think it will work. That simply does not serve America or the consumer very well.
Monica Trauzzi: The timing of the release of your study is certainly interesting because it was released right before the Memorial Day holiday. Were you hoping to create a scenario where some of the Democrats reconsidered even bringing it to the floor because of the link to gas prices?
Charles Drevna: We didn't have any preset date for release. The date for release was going to be when NERA finished their work. It wasn't any grand scheme to have some big announcement that preceded the debate. Naturally, we wanted it out and done before any potential floor debate. But what we wanted was to have a chance for policymakers and decisionmakers and the American consumer to take a look and see what exactly are the parameters required to comply with such legislation. And we were very confident once folks saw what the ramifications of this legislation will be, not may be, what will be, that they'd take a long deep pause and say, "Maybe we should talk about all aspects of climate change legislation, just not the reductions of greenhouse gas and emissions, but the impact on the economy, the impacts on U.S. citizens."
Monica Trauzzi: So, how big are these public acceptance issues that need to be overcome? How difficult is it going to be for lawmakers to convince the public that we need some form of a binding cap and we need to reduce emissions?
Charles Drevna: I would suggest, Monica, that it's the reverse. I think what you're going to see is that the constituency, the voters, the consumers are going to be speaking to the representatives and senators asking them do you realize what will happen if you do this? I think this is going to be a reverse education process. Already we're seeing reports, again, reports that the oil and natural gas and refining industry had nothing to do with, about people saying, "Not a penny more for global climate change legislation." And we're just not talking gas prices, we're talking energy prices, we're talking impacts on the economy. I think, again, our policymakers and Congress is going to have to sit back and say, "Where are we going to go from here on this issue?" And, again, I point to what Chairman Dingell and Chairman Boucher are attempting to do on the House side. You know, they're trying to gather information and trying to decipher what the art of the possible is, what the art of the practical is and still being able to formulate some sort of policy that addresses the situation.
Monica Trauzzi: So, your industry would support a bill like the one that Dingell is starting to ...
Charles Drevna: Well, Chairman Dingell has not proposed a bill yet, neither has Chairman Boucher.
Monica Trauzzi: But what they're talking about.
Charles Drevna: We would support something that makes sense and right now it's just the opposite on what we see of the Lieberman-Warner legislation. That makes no economic sense. It's not justified, given the fact that we believe enactment of Warner-Lieberman or anything resembling it would send this economy into a tailspin.
Monica Trauzzi: So, prospects for the bill as it heads to the floor?
Charles Drevna: I never handicap what Congress or what Senate may or may not do. I think if you share the talk around the area around town, this is the first step. Again, we would like the first step to be not politically expedient, but to be actually practical, to set the foundation, to have the honest debate, to figure out where we're going from here, not some preconceived piece of legislation that absolutely will damage the economy unfortunately, maybe beyond repair.
Monica Trauzzi: Before I let you go I want to have you talk about biofuels for a moment ...
Charles Drevna: Sure.
Monica Trauzzi: ... because you addressed that issue before Congress last month. The biofuels and corn industries would say that the oil and gas industries have spent $50 million on a PR campaign over the last two months that have brought negative attention to ethanol and its link to rising food prices. Is there any truth to that? What is your industry's feeling on biofuels?
Charles Drevna: Well, to answer your first question, we haven't spent a dime on any public relations ...
Monica Trauzzi: So, there's been no $50 million ...
Charles Drevna: I think there's been some ad campaign on showing how we're going to need oil, natural gas, and the products we get from those going out into the future.
Monica Trauzzi: But do we need biofuels too?
Charles Drevna: We need biofuels. Biofuels are an important product, an important part of the overall transportation fuel system. What we don't need, Monica, are massive mandates that skew the economy, that skew the free market, that inhibit technology, that inhibit entrepreneurism. What has happened, and again, it's not what we're saying, look at what others are saying about these massive quantities of biofuels. Corn based ethanol is the prime example as what their cost. Not the oil or gas or the refinery industry saying this, the Chesapeake Bay Foundation, five different environmental groups who sent a letter to Chairman Boucher saying, at the hearing, "Please, stop this. Suspend this." The governor of Texas imploring EPA to suspend the mandate. The water purveyors throughout the country saying, "What are we doing impacting water, all the irrigation that's required to grow this corn for fuels?" The grocers, the cattlemen, the poultry producers, the pork producers, these aren't entities who are normally affiliated with the refining industry. Well, we've been saying it for a long time. As a matter of fact, when I testified a few weeks ago, I referenced testimony that NPRA gave almost 20 years to the date warning about mandating biofuels and the potential impact it will have on supply and on food prices.
Monica Trauzzi: So, we should use biofuels, just not mandate ...
Charles Drevna: We should let the free market decide where, when, how best to use them. That's what this nation was built on.
Monica Trauzzi: OK, we'll end it right there on that note. Thanks for coming on the show.
Charles Drevna: It's my pleasure to be here again, thank you.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
[End of Audio]
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