Guest Column from Montana Petroleum Association
Petroleum Industry View: Climate Bill Would Cost Montanans
According to a petroleum group, the U.S. Senate's “cap-and-trade” bill would hurt the state and the nation.
By Guest Writer, 11-17-09
While the U.S. Senate considers a “cap-and-trade” bill that includes creation of a new federal bureaucracy to reduce greenhouse gas emissions, the Montana Petroleum Association (MPA) is becoming more concerned about the toll such a plan would take on our industry and on Montana consumers. The Senate bill, modeled after one that passed the U.S. House of Representatives in June, is nearly 1,000 pages long. We have sifted through most of the proposal, and with each reading it becomes clear what this bill will and won’t do.
It will:
--Increase the cost of finding, producing and refining the energy we need for heating, cooling, power and transportation;
--Create a massive federal bureaucracy that will hamper business in the U.S. and raise costs to consumers;
--Increase our reliance on foreign energy.
It won’t:
--Impact climate change on a global scale.
Oil and natural gas production is an important segment of Montana’s economy. A cap-and-trade program would cripple the industry’s ability to do business while propping up a renewable energy industry that is unlikely to replace jobs lost in the oil and natural gas industry. Economic analysis shows that nearly 12,000 Montana jobs are supported, directly or indirectly, by the oil and natural gas industry. Each year, the industry’s impact on the state’s economy amounts to more than $9 billion.
MPA represents three sectors of the petroleum industry in Montana:
--Upstream – exploration and production
--Midstream – pipeline operation and commodity marketing
--Downstream – refining and petroleum product wholesale and retail sales
All of these sectors are vital to Montana’s economy. The cap-and-trade bill, if passed, would affect all three sectors and the people who work in them. Montana’s refineries would be especially hard-hit and so would everyone who relies on gasoline and diesel fuel.
Four Montana refineries operate at near capacity. Located in Laurel, Great Falls, and Billings, they produce the gasoline and diesel fuels America needs for work, recreation and public safety. These refineries also keep nearly 1,000 Montanans working in good, high-paying jobs.
Each year Montana refineries produce nearly 30 million barrels of gasoline, 20 million barrels of diesel and pay more than $52 million in state taxes, according to an economic analysis conducted for MPA in 2007. They keep Montana’s economy as well as its cars, trucks and agriculture equipment moving.
The Senate climate bill would throw U.S. refineries into a carbon emissions trading scheme involving a regulatory maze nearly impossible to navigate with any efficiency. Under a cap-and-trade framework, industries and utilities that release carbon are granted a limited number of allowances for those emissions. Exceed those allowances and a company must pay for each ton emitted or face government fines. At only 2.5 percent of total allowable industrial emissions, the petroleum industry’s allocation would be the most severely limited of any industry. Each year those allowable levels would be ratcheted down, forcing companies to pay for expensive retrofitting, shut down operations, or purchase allowances on a carbon exchange. Not only would refineries be liable for the carbon emissions that are a byproduct of the refining process, but also for the tail-pipe emissions of gasoline and diesel-powered vehicles.
The bottom line would be a reduction in domestic gasoline and diesel production from American refineries. This would result inevitably in two outcomes: greater reliance on oil and refined products from outside North America and extreme price volatility at the pump. One government analysis says a cap-and-trade program would raise retail prices to $5.10 per gallon for gasoline and $5.60 per gallon for diesel fuel. (Source: U.S. Energy Information Administration, “Energy Market and Economic Impacts of HR 2454,” August 4, 2009)
For Montana, passage of the Senate bill would mean a double whammy of greatly increased costs for consumers while killing jobs at Montana refineries and reducing revenues that state and local governments rely on for education, roads and public safety. We are grateful to Sen. Max Baucus for voting against the Senate bill in an important committee vote on November 5. Sen. Baucus heard the concerns of Montanans from around the state.
Dave Galt can be reached at dave@montanapetroleum.org or 406-442-7582.
According to NOAA the U.S.A. has just had the coldest and wettest october since 1895. Makes me laugh and keeps me laughing every time I think about it.
Comment By Joy Wagner, 11-18-09Obviously, Mr. Gault gets paid to represent his industry and therefore presents a biased viewpoint. Unfortunately, this article doesn't provide a better solution to global climate change that will end up costing Montana much more than the $9 billion involved in energy production (according to the figure used in this article). Left unaddressed, climate change will force substantial changes to agriculture, forestry, tourism, and other industries that would have to alter practices -- all because the oil and gas industry is not taking responsibility for the environmental damage they cause. Instead of working to improve the legislation, they choose to be against the will of the American electorate by opposing all legislation to address global climate change.
I support energy development of all kinds in Montana, including coal, oil, and gas. But we have to insist that industry take responsibility to invest in cleaner technologies. Thus far, the industry has not made any effort to self-regulate or encourage pollution reduction. Therefore, Americans are left with only one option -- creating a "regulatory maze" that will protect our common environmental property and our rights.
No surprise that an oil representative doesn't want to see the US weaned off of traditional energy sources, even though oil puts our national security at risk and prevents us exploring safer, cheaper energy options. We spend $1 billion a day on foreign oil when we could be investing that money into creating badly-needed jobs at home. Passage of the climate bill would stimulate massive investment into the nationwide clean energy industry, encouraging competition between energy firms and leading to a better product and cheaper prices on clean energy for consumers. This bill would also allow for the massive energy efficiency improvements that our infrastructure requires nationwide, which would help save us billions of dollars on energy bills and create jobs in retrofitting, weatherstripping, and technology updates.
The climate bill is expected to help create at least 6,000 jobs in Montana alone. And in a state that ranks 5th in the nation for potential wind energy production, we're just being fooled by the coal and oil companies if we believe that fossil fuels are our only options. We need to invest in clean energy today, and we need Senators' Baucus and Tester's support for the climate bill in order to make that happen.
What makes anyone think that true believers in catastrophic anthropogenic climate change aren't biased and misinformed to say the least?
Comment By paul stephens, 11-19-09I'm afraid Mr. Galt is correct about the current "cap and trade" bills in Congress. They are all cost, and virtually no benefits, either to the economy or to the environment. But Galt fails to point out that the "mark-ups" on these bills, promoted by the coal, petroleum, and nuclear industries, are most of the bad parts of them. Since he only represents one of these industries, he should be willing to admit that more coal and nuclear subsidies are totally wrong, and continuing to subsidize private automobiles (through highways, oil wars, etc.) is also very wrong.
The simple, clear, and free-market solution is a simple across the board carbon tax. This impacts gas and petroleum much less than coal, while giving carbon-free renewables a big competitive edge - which they deserve, because they don't pollute or contribute to global warming, and they are perpetual and sustainable.
Sweden instituted a carbon tax in the early 1990's, and it's now at about $150/tonne (metric ton, or 2200 lbs). This means that coal costs about $200/ton to burn, instead of the $50-$60 presently paid by coal consumers, so obviously there will be no new coal plants, and most existing ones will have to shut down, once conservation and renewables have taken up the slack.
$150/tonne is only about $1/gallon for petroleum products, though, and half that for natural gas equivalents. So, it won't be noticed much in the transportation industry, since we've already survived $4/gallon gas (which is actually the correct price - 10 times what it was in 1965, which is the inflation factor). A good part of the revenues from carbon taxes should go into public transportation, conservation, and efficiency investments. The U.S. presently consumes twice as much energy, per capita, as other wealthy countries (except Canada and Australia), and that's because we all drive large gas-guzzlers, live in larger homes, and don't have a good energy conservation or carbon tax policy.
Depleting one's non-renewable resources is never good for the local economy. It's like living off of capital (savings), instead of creating a new sustainable, ecologically sound economy.
I continue to puzzle over any value in the cap and trade portion of the climate change bill. It does not reduce emissions but attempts to lock them in at current rate. Further it puts every industry in this country at the mercy of hedge funds who are probably the biggest backers of this portion of the bill on climate change. We have already experienced how they forced the price of gasoline and wheat way over what it should be in a true market-based economy. The cap and trade portion is equivalent to the derivatives created by the lending and insurance industry with no good long term benefit for anyone. Climate change can be addressed without cap and trade.
Comment By Todd, 11-30-09And now we know what a lot of us has suspicioned for a very long time, global warming is the biggest hoax ever perpatrated on the world. So many bought into it hook line and sinker.
Comment By Mickey Garcia, 11-30-09Depends on which global warming you're talking about. Since the end of the latest ice age about 18 thousand years ago the planet has been warming naturally. Atmospheric temp has risen about 16 degrees F and ocean levels have risen about 300 feet since then. If you're talking about catastrophic global warming caused by anthropogenic "emissions" of CO2. Total scam and hoax. Not possible under the known laws of physics.
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