The People of America's Oil and Natural Gas Indusry

Climate Bill: 'Unacceptable as Drafted'

Jane Van Ryan

Jane Van Ryan
Posted May 18, 2009

In a conference call with reporters today, API President and CEO Jack Gerard said the Waxman-Markey bill to reduce greenhouse gas emissions is "unacceptable as drafted." He said the bill's potential economic impact cannot be overstated and called on Congress to conduct a thorough analysis.

Jack pointed to three provisions that should be addressed. First, the cap-and-trade allowances must be equitable "as we transition to a carbon-constrained economy." As he explained, various industrial sectors would be held responsible for their carbon emissions and those of their customers. If a sector is to be held responsible for 10 percent of the carbon, the sector should receive 10 percent of the allowances under the cap-and-trade system. The bill now stipulates that refiners would receive only 2 percent of the allowances, although they would be held responsible for the carbon emitted by refineries as well as the carbon from the transportation sector, including motorists, truckers, farmers and others. Making the allowances equitable across the economy is "our top priority as an industry," Jack said.

Second, Jack noted the Waxman-Markey proposal has the potential to be economically disruptive and deserves thorough analysis. He quoted a Heritage Foundation analysis that found the bill could destroy more than 800,000 jobs and raise gasoline prices by $1.70 gallon. He said the bill could mark a return to $4.00 a gallon gasoline, which he called "unacceptable" for American consumers.

Jack also mentioned that the bill contains a provision to help other industries, including steel, compete abroad through a system of tariffs. But the bill specifically excludes the refining industry. "We keep hearing this is a market-based proposal. It is not," Jack said. "The oil and natural gas industry operates in the global marketplace and making it less competitive could put it at a significant disadvantage," he said.

"This is the most significant piece of legislation in our lifetime on energy," Jack said. "We need to step back, take a deep breath, and get this right."