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Refiners Say Low-Carbon Laws Worse Than Cap-and-Trade (Update2)
2010-08-03 22:16:07.552 GMT
(Updates with California Air Resources Board comment in the
11th and 12th paragraphs.)
By Simon Lomax and Mario Parker
Aug. 3 (Bloomberg) -- Plans to reduce the carbon content of
U.S. transportation fuels are likely to boost oil imports from
the Middle East and lead to more pollution from diesel-fueled
tankers, according to a report commissioned by the National
Petrochemical and Refiners Association.
A low-carbon standard is "even worse" than the
"terrible" cap-and-trade legislation for carbon dioxide and
other greenhouse gases that recently collapsed in the U.S.
Senate, said Charles Drevna, president of the refining industry
group. The association estimated that plan would have cost the
industry more than $20 billion a year.
Low-carbon fuel standards, in which the government mandates
the use of oil alternatives such as ethanol, natural gas and
electricity, are already planned in some U.S. states, including
California. Refiners are concerned that federal lawmakers will
follow suit, Drevna said.
A low-carbon standard would "discourage the use of
Canadian crude in the U.S. and encourage imports of crude from
areas that produce light sweet crude, most notably the Middle
East," according to the study by Minneapolis-based Barr
Engineering Co.
Oil shipped from the southern Iraqi port of Basra would be
"less penalized" than crude recovered from tar sands in
Canada, Joel Trinkle, a senior consultant with Barr Engineering
and co-author of the study, said in a telephone interview.
The tar sands must be heated to separate the oil from sand
and clay. The process requires more energy and produces more
carbon dioxide than pumping crude oil from conventional wells.
'Redirection' of Supplies
If a low-carbon fuel standard blocked the importation of
tar-sands oil in the U.S., the oil would probably go by pipeline
to Canada's west coast and by tanker to China, Trinkle said.
More Middle East crude would be shipped by tanker to the U.S. to
make up for the Canadian supply, he said, meaning a new rule
would "simply cause a redirection of crude supplies."
The extra tanker runs might produce up to 19 million metric
tons of carbon dioxide, according to the study. That is less
than 1 percent of the 2.3 billion tons of carbon dioxide from
U.S. oil consumption last year, according to Energy Information
Administration data.
'Counterproductive'
If a U.S. low-carbon fuel standard causes a "shuffle" in
crude oil consumption that boosts tanker fleet emissions, then
it's a "counterproductive piece of regulation" that
"shouldn't even be on the table," Drevna said.
Refineries in the U.S. Midwest and South have invested in
upgrades to their operations to handle the heavier Canadian
crude and would be hurt financially if imports of tar-sands oil
were curtailed, he said.
Stanley Young, a spokesman for California's Air Resources
Board, said the state's low-carbon fuel standard "will promote
the development of next-generation and alternative fuels." The
standard, proposed in 2007 by California Governor Arnold
Schwarzenegger, a Republican, aims to cut the carbon content of
fuels consumed in the state by at least 10 percent by 2020.
"That will generate local jobs, provide cleaner fuels to
consumers, and help reduce our dependence on petroleum and
crude, no matter where it comes from," Young said in an e-mail.
Ethanol Industry Concern
The Renewable Fuels Association, the ethanol industry's
largest trade group, sued California in December over its low-
carbon fuel standard, or LCFS, citing a component of the
regulation that would measure emissions created by land use.
Ethanol is made from corn in the U.S., and the law includes the
emissions from raising corn in ethanol's carbon total.
If California "were to do away with the indirect land-use
changes we likely wouldn't have a problem with the LCFS," Geoff
Cooper, the Renewable Fuels Association's vice president of
research, said in a telephone interview.
"It's critically important that we get the first one
right," Cooper said.
For Related News and Information:
Top environment stories: GREEN <GO>
Stories about U.S. and climate: TNI US CLIMATE <GO>
Global emissions data: EMIS <GO>
Northeast U.S. trading: RGGI <GO>
--Editors: Richard Stubbe, Joe Link.
To contact the reporters on this story:
Simon Lomax in Washington at +1-202-654-4305 or
slomax@bloomberg.net;
Mario Parker in Chicago at +1-312-443-5927 or
mparker22@bloomberg.net.
To contact the editor responsible for this story:
Dan Stets at +1-212-617-4403 or dstets@bloomberg.net.
