Ailing U.S. oil refiners could face a crippling period of contraction under a House-approved climate change bill, making the country more dependent on imported refined products.
The so-called cap-and-trade bill narrowly passed by the House of Representatives in June would limit greenhouse gas emissions by requiring polluters to acquire permits for the carbon dioxide they spew into the atmosphere.
To soften the blow, industry would initially be granted free permits covering 85 percent of emissions. But the refining industry managed to get only 2 percent of the allowances, leaving them vulnerable to encroaching foreign companies.
The bill is "going to put them out of business," said Phil Flynn, analyst at PFGBest Research in Chicago. "I think you're going to see refiners close down, especially in this environment we're in right now."
U.S. refiners say it is unfair they would receive just 2 percent of permits, while utilities won 30 percent of permits initially, covering most of their emissions.
Huge refining complexes operated by oil majors such as Exxon Mobil Corp or BP Plc are unlikely to go under. But smaller independent facilities, which are likely to be older and more polluting, are at risk.
Sarah Ladislaw, a Fellow in Energy at the Center for Strategic and International Studies, said any bill seeking to combat global warming would probably hurt U.S. refiners.
"The ultimate aim is wring carbon out of the system and the refining industry is all about producing carbon-based fuels, so ultimately ... it will be harder for them to do their job," Ladislaw said. "But that's in essence the goal.">>>MORE
Oops, don't want to forget the grab-bag of goodies to every special interest that could get their snout in the trough, which of course will be recycled into campaign contributions.
A perfect bill!