NPRA's Drevna discusses refining industry's concerns with Waxman-Markey bill

With several House committees planning to act on climate and energy legislation in the coming weeks, the Waxman-Markey bill will likely face a series of changes as it makes its way to the floor. During today's OnPoint, Charles Drevna, president of the National Petrochemical and Refiners Association, discusses his industry's concerns with the way this legislation currently handles the allocation of allowances. He discusses NPRA's plan of action as the bill makes its way through the remaining committees. Drevna also addresses how his industry is preparing for a national cap-and-trade program.


Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi Joining me today is Charles Drevna, president of the National Petrochemical and Refiners Association. Charlie, nice to see you, thanks for coming on the show.

Charles Drevna: Thank you, it's good to be back.

Monica Trauzzi: Charlie, the House Energy and Commerce Committee recently moved the Waxman-Markey climate and energy bill. It's nowhere near the finish line, but this is a significant step for the bill making it through the committee. You have some big concerns about how the bill handles allowances for your industry. What is your plan of action moving forward as this bill continues to make its way through the House?

Charles Drevna: Well, Monica, first of all I think there's one thing we can all agree on, that this legislation or any legislation that looks at global climate is one of the biggest, comprehensive, complex pieces of legislation that this Congress will ever enact, or at least attempt to enact. But the tangential with that, we also have to recognize that this is going to impact decades and generations to come and the other thing we must understand is that the vital role that the energy sector, in particularly the refining sector will play going forward to make sure that our economy continues to grow and strengthen and is secure. Once all of those are noted, again, we go back to saying this is why this is going to be a very complex and very debated piece of legislation. Now, our plan, our plan is to continue to do what we have been doing to address what we see are the fatal flaws of the legislation. We believe that there are about four or five basic core precepts that must be integral to any climate change legislation. Among those are international participation, harmonization with concurrent statutes and regulations, the creation of no winners or losers, and then everything should be economy wide and sector wide. We believe that this legislation, the Waxman-Markey legislation fails on all of those precepts. Not only does it fail on those critical components that we believe have to be, again, integral to the legislation, but what the Waxman-Markey bill does is, in our opinion, it attempts to amend the laws of chemistry, thermodynamics, and economics too.

Monica Trauzzi: All right and one of your concerns is that foreign refiners will be at a financial advantage because they're going to be able to do their work for a cheaper than the U.S. But what other legislative option is there? I mean should the U.S. basically be making it cheaper for you guys to continue to pollute? I mean how do we solve the problem?

Charles Drevna: Let me interrupt you there for a second and the words "continue to pollute." I'd take a little bit of exception to that. We have, over the decades, been challenged tremendously with a lot of environmental legislation and regulation, which we have not only complied with, we've over complied. So I mean our record stands for itself as far as creating a clean, viable, needed product for consumers and keeping the environment safe. Now, again, this legislation is not only countrywide, but it has to be globally wide. When we look at what has transpired, our supposed contribution from the refining sector, including the facility itself and the fuels and the other...both the transportation fuels and other components of the refining process, we make up about 45 percent of the emissions, many of which we can't control. We are allowed 2 percent of the allowances and to me, to us, that's does create winners and losers and that is not economy or sector wide. And the question has to be why? Why is it that the refiners only get 2 percent? The word is, or the reason being, we were told, well, you can simply pass your cost through at 100 percent. Well, again, as I mentioned before, this legislation attempts to change the laws of economics, because we all know that there's no way we're going to… should we be able to pass 100 percent of our cost through. It just doesn't happen. And if it did, then the consumers would be outraged. So either way we see this as detrimental to the overall economy.

Monica Trauzzi: A strong and successful industry though should be able to adapt with changing times. Do you see a path forward for how your industry can adapt with a cap and trade in place?

Charles Drevna: Well, I have yet to see a cap and trade proposal that anyone can adapt to, let alone the refining industry. Just look what happened in Europe. Europe, based on Kyoto, decided they were going to go cap and trade. Now, what happened was the individual countries decided that they didn't want to sacrifice their economic security or standard of living. So what Kyoto did and what the European cap-and-trade process did, it was designed to fail. I would truly believe it was designed to fail. And then in that way it was a success. I have yet to see a cap-and-trade proposal that doesn't put the economy, as a whole in a much more precarious position than we are now. And when you talk about the refining industry, again, I go back to there has to be international participation. India has made no attempts to hide the fact that they plan on shipping a lot of refined product to this country. They're expanding that refinery that they built. It's going to be a million barrels a day with the express intent of shipping it to the United States. That puts us at a competitive disadvantage. That puts the consumer at a competitive disadvantage.

Monica Trauzzi: Isn't the larger goal here though, aren't we in a transition period to a place where we're using less fossil fuels?

Charles Drevna: Again, Monica, I think that's perhaps the ultimate goal, but the reality of the situation is, and even U.S. government data suggests for the next 2, 3, 4, or 5 decades we are going to be dependent upon oil, natural gas and coal. Now, should we be developing alternatives? Yes, absolutely. Are they here today? Will they be here 10 years from now? Probably not. Will they be here in 20? Who knows? But you can't transform a whole economy based on maybe something will be out there. I would suggest that we perhaps shouldn't use the word alternatives and maybe we should use the word supplements, because I don't believe that there will be alternatives to 80 percent of the needs that will be provided, energy needs worldwide ...

Monica Trauzzi: There's a lot of research and development happening right now across this country trying to reach that goal.

Charles Drevna: They're trying and they're laudable goals. But the question has to be what happens if it doesn't? And no one has told us, no one has said that, you know, there is no silver bullet or magic wand out there that we see today. And even on a going forward basis, you have to look at, again, internationally and not so much, I don't want to dwell on the fact about CO2 reductions, let's just look at what's going to happen in growth. You know, the world's population is going to continue to explode. These folks are going to want to have the same standard of living that we've become accustomed to. Who's to tell them no? Now, you could double, triple, quadruple wind. You can double, triple, quadruple solar. All of these things are fine; on the pie chart it's only going to be a small fraction increase. So, again, we're not saying we don't do these things, but we're saying we have to have care. We have to look at the picture holistically and not just say sometime in the next decade we're going to flip a switch and we're going to be off fossil fuels and onto alternatives. It simply is not going to happen.

Monica Trauzzi: Chairman Waxman has indicated that he would like to work further on emissions allocations for small refineries. Do you see a possible victory there for your industry if the smaller refineries are given 3 percent instead of two?

Charles Drevna: When you're talking a percentage, one or 2 percent versus 45 percent, it doesn't matter. Again, the reason why they say that we shouldn't get the inequitable share of emissions, first of all let me go back and say even in Europe, even my criticism of the European cap-and-trade program, in Europe they don't have fuels under the cap. So we do here. That's what the basic problem is. So we're saying either you take fuels out from under the cap or give us the equivalent emissions that you give to the rest of industry. This is why we're so adamant about this being an unfair bill, targeting unfairly the refining industry and ultimately drivers, truckers, other consumers. That's who's going to foot a lot of the bill. And going back to the potential to pass this cost through, even if you pass through 80 percent of them, refiners are not going to be able to afford to buy the credits. It's going to be very difficult. I'm sorry, go ahead.

Monica Trauzzi: Yeah, I have to cut you off. We've reached the end of our time, but clearly there's a lot left to be debated over the next couple of months as this makes its way to the floor. I thank you for coming on the show.

Charles Drevna: My pleasure.

Monica Trauzzi: And thank you for watching. We'll see you back here tomorrow.

[End of Audio]



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