How does the Senate's "American Power Act" treat the petrochemical and refining industries? During today's OnPoint, Gregory Scott, executive vice president and general counsel at the National Petrochemical & Refiners Association, explains why he believes the "American Power Act" will raise energy costs for Americans and negatively affect the economy. He also talks about how the transportation sector is handled in the bill and weighs in on the legality of U.S. EPA's "tailoring" rule.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Gregory Scott, executive vice president and general counsel of the National Petrochemical and Refiners Association. Greg, thanks for coming on the show.
Gregory Scott: Thank you for inviting me, Monica.
Monica Trauzzi: Greg, Senators Kerry and Lieberman released their American Power Act last week and why do you believe this bill would raise energy costs for Americans?
Gregory Scott: It's very simple, in order for the emission reductions to be reached that are required under the act, of CO2, energy prices have to go up, gasoline, diesel fuel, electricity, otherwise, it won't change consumer behavior.
Monica Trauzzi: There's been a lot of discussion specifically about the transportation provisions already. Under the bill, the transportation sector won't be able to trade allowances. Would you accept the bill if the transportation sector provisions were altered?
Gregory Scott: I don't believe so. The domestic refining industry is very concerned about what the prices of transportation fuels, gasoline and diesel fuel, would be. Allowing trading of the provisions actually might make the allowances more expensive. If we get Wall Street involved, we've seen what's happened in the past with Wall Street trading, Wall Street involvement in the financial crisis. I'm not sure we want them involved in the trading of carbon credits.
Monica Trauzzi: So, what can be done to the bill to make it more palatable for your industry?
Gregory Scott: I would think we need to make sure that it treats both domestic and foreign manufacturers of goods equally. For example, there are trade protections tucked into the bill for certain industries. Interestingly enough, the refining industry, the domestic refining industry is specifically excluded from those trade protections. So, as the bill moves through its targets, increasingly we will be losing jobs here in the United States in the refining industry and energy prices will go up. We'll really be exporting our energy future to abroad and importing gasoline and diesel fuel from abroad in the future.
Monica Trauzzi: Are the transportation provisions counterproductive with the vehicle emission standards we saw passed?
Gregory Scott: I think they really are. In fact, there are two programs right now that are already reducing the carbon footprint of transportation fuels. One, as you mentioned, is the CAFE standards, part of the '07 Energy Bill, that require vehicles by a date certain to get up to 36 1/2 miles per gallon. That's going to reduce demand for carbon fossil-based fuels and will reduce the carbon footprint. Secondly, you have the Renewable Fuel Standard, the biofuel mandate. By 2022 we're supposed to be using 36 billion gallons of biofuels. There are challenges to meet with both of those programs, but if they're fully implemented there will be a total reduction of 27% of the GHG footprint from transportation fuels. That's a huge step and it ought to be acknowledged and it's not in the Kerry-Lieberman bill.
Monica Trauzzi: Has the Gulf spill impacted your industry's role in the climate discussions? I mean is there a change in tone towards your industry and also, moving forward, do you expect a change in tone?
Gregory Scott: It hasn't necessarily impacted our industry. I mean at this point crude deliveries are still being made in the Gulf of Mexico and so there has not been an impact on our refineries. But, in terms of the tone on the Hill, certainly this is a tragic situation. I know that many people, government, industry, and others are working to try to resolve the issue as quickly as possible. I think it will ultimately have very little effect on whether senators agree to vote for or vote against the Kerry-Lieberman bill.
Monica Trauzzi: Would you support some form of an emissions reduction plan this year?
Gregory Scott: Conceptually, if it did not pick winners and losers and perhaps was a less political bill, if the goal really was to reduce carbon emissions and not to advantage one sector over another. We haven't seen that on Capitol Hill to date and I'm not going to hold my breath to see it in the near future.
Monica Trauzzi: Well, one of the big arguments for the Kerry-Lieberman bill is that they sat down with all the individual industries and really tried to please each industry. You don't think that that happened successfully?
Gregory Scott: I don't think that goal has been achieved. This needs to be economically neutral, economically beneficial, and there are some things that were off the table in terms of negotiation, for instance the targets and timeframes. Getting to an 80 percent or an 83 percent reduction of carbon emission by 2050 is a goal that is just almost impossible for our industry to meet and still produce the fuels that America runs on every day.
Monica Trauzzi: EPA released its tailoring rule last week and this deals with the regulation of emissions from stationary sources. It's moving forward with its push, you know, despite what's happening on the Hill. Is the legislation that was introduced a better option than EPA regulation? Would you prefer to have that legislation passed than to have EPA regulate at this point?
Gregory Scott: I'm going to avoid your question a little bit and say that the Clean Air Act was never meant to regulate greenhouse gas emissions and so EPA is trying to fit a round peg into the proverbial square hole. Certainly, if the Congress could come up with a greenhouse gas control program that builds on what's already being done without duplicating or actually conflicting with it, it's certainly going to be better than just about any other program that we see out there right now.
Monica Trauzzi: Lisa Jackson said she's confident that the tailoring rule will uphold in court. Do you think it's going to be overturned and how is NPRA going to be involved in that push?
Gregory Scott: We haven't made a decision. We're taking a look at the tailoring rule. I think it's fairly difficult for me to agree with administrator Jackson's viewpoint. The Clean Air Act clearly says that if the EPA is going to regulate a substance it needs to regulate emissions at 250 tons per year, not 100,000 tons per year which is what was in the tailoring rule. That's not me saying that, that's Congress saying it. EPA has gone to great lengths to talk about absurd results and administrative necessity, but, quite frankly, they created the crisis with the endangerment finding, with the tailpipe GHG rule. And to create a crisis and then say, oh, we have to take this path out of it, it clearly ignores the wording of the Clean Air Act, I think is a suspect legal argument.
Monica Trauzzi: OK, we're going to end it there. Thank you for coming on the show.
Gregory Scott: Thank you for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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