Conoco, BP, Caterpillar leave climate coalition

ConocoPhillips, Caterpillar Inc. and BP America have left the U.S. Climate Action Partnership, a coalition of more than two-dozen companies and environmental groups lobbying Congress to pass greenhouse gas emissions cap-and-trade legislation.

BP America, a unit of London-based BP PLC, notified fellow U.S. CAP members of its decision by letter today. Houston-based ConocoPhillips broke the news in a press release.

In interviews, officials from both companies said legislation pending in Congress, including a bill passed by the House last summer, does not do enough to promote expanded natural gas consumption as a hedge against climate change. Moreover, the legislation puts the transportation sector -- including oil and gas producers -- at a disadvantage compared with coal.

"House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing GHG emissions," ConocoPhillips Chairman and CEO Jim Mulva explained in the statement. "We believe greater attention and resources need to be dedicated to reversing these missed opportunities, and our actions today are part of that effort."

ConocoPhillips will not participate in U.S. CAP lobbying activities in 2010 and beyond, Red Cavaney, the company's senior vice president for government affairs, confirmed in an interview. Cavaney said his company will work through nascent transportation coalitions, as well as major trade groups -- including the American Petroleum Institute and National Association of Manufacturers -- to help shape climate and energy legislation on Capitol Hill.


Among the issues his company will focus on are promoting expanded natural gas production and consumption and ensuring domestic refineries are not put at a competitive disadvantage with refineries in countries without a greenhouse gas emissions cap.

"We'll be trying a rifle approach instead of a shotgun approach," Cavaney added.

If the Senate opts to move forward with the emissions cap-and-trade system envisioned in the House-passed bill, the Senate bill must increase free allowances for petroleum refineries, Cavaney underscored.

"We want to make sure that refineries get protections," he added.

The House-passed bill (H.R. 2456) would cap carbon dioxide and other heat-trapping gases at 17 percent below 2005 levels by 2020 and 83 percent by 2050. Under the bill's cap-and-trade proposal, power plants, oil refiners and other regulated entities must pollute less or buy and sell emissions allowances to meet the federal targets.

The bill would allocate the electricity sector 35 percent of allowances -- nearly commensurate with its share of U.S. emissions. The oil and gas sector, which accounts for roughly a third of U.S. greenhouse gas emissions, would receive 2 percent of the allowances.

ConocoPhillips has maintained that oil refiners won't be able to pass along 100 percent of the cost of buying allowances to consumers. Thus, refiners should be provided an allowance allocation for such "uncovered costs."

A BP spokesman voiced similar concerns in an interview.

"We believe that legislation should create a price for carbon that is across the entire spectrum of the economy," spokesman Ronnie Chappell explained. The transportation sector bears a "disproportionate share of burden."

"We don't think the allowance structure in the bills will create a deep and liquid carbon market," Chappell added. "The markets will be volatile, and so will the price of carbon."

He charged that by providing hefty allowances for coal-burning electric utilities, the House-passed bill would soften demand for natural gas.

"The lowest-cost option for reducing emissions is the increased use of natural gas," Chappell added. "Under the pending bills, demand for natural gas will actually go down ... because of the concessions made to coal."

Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) are crafting companion legislation with input from moderate Democrats and Republicans, the U.S. Chamber of Commerce and other stakeholders. The bill's three principal sponsors say they are considering alternatives to the House bill's economywide emissions cap-and-trade system.

ConocoPhillips and BP officials declined to comment on the Senate bill.

U.S. CAP, which was launched in early 2007, has not endorsed specific legislation. The group's blueprint supports an economywide program to reduce U.S. emissions of carbon dioxide and other heat-trapping gases to 20 percent of 2005 levels by 2050.

A U.S. CAP spokesman declined to respond directly to a list of questions regarding the membership changes announced today but issued a written statement. The statement said Peoria, Ill.-based Caterpillar is leaving the coalition.

Kate Kenny, a Caterpillar spokeswoman, explained in an e-mail today that her company will direct its resources toward the commercialization of technologies that will "promote and provide sustainable development and reduce carbon emissions."

She noted that Caterpillar recently joined the FutureGen Alliance, a public-private partnership established to build a coal-fired, near-zero-emissions power plant in eastern Illinois.

"The alliance will strengthen industry and government knowledge of advanced technology for producing low-carbon coal-fired electricity generation, by demonstrating carbon capture and sequestration techniques," she added. "Demonstrating these technologies will help the U.S. and the rest of the world generate competitive energy supplies in a more sustainable manner."

The U.S. CAP statement said the companies' participation has been "invaluable" and underscored that U.S. action on energy and climate legislation in 2010 will preserve and create domestic jobs, enhance energy security, and generate new investment in clean energy.

"USCAP is a CEO-led organization whose membership changes periodically," the statement concludes. "In fact, over the past seven months, USCAP has added three new corporate members -- most recently in late October -- and expects to add new members in the coming months."

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