CLIMATE BILL SHOULD NOT HURT SMALL BUSINESS REFINERS, GOVERNOR SAYS
CHEYENNE, Wyo. - Oil refineries run by small businesses play a critical role in providing transportation fuel to consumers and industries in Wyoming and throughout the Intermountain West.
In a letter today to Rep. Henry Waxman, Chair of the U.S. House Committee on Energy and Commerce, Gov. Dave Freudenthal expressed his concern with the treatment of these small business refiners in the proposed climate change legislation currently before the committee.
The Governor said the draft bill would put an undue burden on these refiners by expecting them to bear the burden of the full cost of carbon emissions generated by the fuels they produce.
“The draft climate bill proposes to make the few small business refiners in my state responsible for all consumer carbon emissions for fuel they supply,” the Governor wrote. “It appears that each year, cap and trade would require these small refiners to pay hundreds of millions of dollars to cover the carbon use of several million consumers.”
There are just five operating refineries in Wyoming, all of which are owned by small business refiners, and these facilities supply virtually all transportation fuel consumed in the state, the Governor said. They provide fuel to the public, to industries like mining, farming and ranching and also serve the railroad industries, the airlines, several Air Force bases and the National Guard.
The draft bill provides no guarantee that small refiners would recover these carbon costs, the Governor said. “If enacted as written, the new energy policy for much of the interior West would be to load all consumer, commerce, agriculture, industry and military carbon emissions from transportation fuel on the backs of a few small processors of crude oil.”
The text of the Governor’s letter follows.
May 4, 2009
The Honorable Henry A. Waxman
Chairman, Committee on Energy and Commerce
U.S. House of Representatives
Washington, D.C. 20515
Dear Chairman Waxman:
I want to thank you for taking the time from your extraordinarily busy schedule to meet with me on March 26. As you recall, we talked primarily about interstate electric transmission and the role it has in bringing renewable wind power from Wyoming to western load centers. I appreciate your listening to my ideas. Our schedules did not allow for discussion of another topic important to our region.
I write to express my concern with the proposed treatment of small business refiners in the landmark climate legislation the Energy and Commerce Committee is considering.
In Wyoming, there are five operating refineries, all owned by small business refiners. Large oil companies closed or sold their refineries in the state years ago. There is no gasoline or diesel pipeline to Wyoming, or much of the Intermountain West, from sources outside the region. Hence, Wyoming refineries supply virtually all transportation fuel consumed in the state. They also provide fuel to:
• The public in Colorado, South Dakota, Nebraska, Utah, Nevada, Idaho, Montana and eastern counties in Oregon and Washington.
• Farming, ranching, mining, trucking, tourism other economic segments in Wyoming and the region.
• Interstate highways of I-80, I-90 and I-25 in Wyoming.
• Major freight train corridors that run through Wyoming.
• Airlines that serve Wyoming airports and the Salt Lake City International Airport.
• Hill Air Force Base, Ellsworth Air Force Base, and air National Guard units.
• Yellowstone National Park.
In Wyoming, consumers have few transportation options. There is neither passenger rail, light rail, subway nor other mass transit systems. Commercial airline and bus service is limited. Simply put, we rely on small business refiners for transportation, our economy and our quality of life.
With this in mind, the draft climate bill proposes to make the few small business refiners in my state responsible for all consumer carbon emissions for fuel they supply to the entities noted above. It appears that each year, cap and trade would require these small refiners to pay hundreds of millions of dollars to cover the carbon use of several million consumers. The bill provides no guarantee that small refiners would recover these carbon costs. If enacted as written, the new energy policy for much of the interior West would be to load all consumer, commerce, agriculture, industry and military carbon emissions from transportation fuel on the backs of a few small processors of crude oil.
Moreover, the legislation (as currently drafted) does not extend transitional assistance, phase-in provisions, safeguards or other measures to help these small refiners comply with the extraordinary requirements of the bill. They are left on their own to manage the best they can. Because of their size and capital structure, it is likely these companies will be among the last to acquire the financing, technical expertise, equipment and construction contracts necessary for evolving to a low carbon economy. As a result, these small businesses will likely be among the first to succumb to the financial shock of this bill, leaving regional consumers without reasonably-priced interim alternatives for transportation fuel. Our citizens’ reliance on small businesses for essential goods and services is not a valid reason for disproportionately burdening them with unfair and negative consequences from this legislation.
Mr. Chairman, I fear the weight of this kind of requirement on Wyoming would hurt consumers, refiners and the transportation interests in my state in unintended ways.
If cap and trade were not enough, the draft bill adds even more heavy requirements on small business refiners in the form of a Low Carbon Fuel Standard (LCFS). The addition of a LCFS suggests, on its face, that cap and trade may not work as intended. Its inclusion in the bill implies that consumers will not behave the way Congress intends, so a more forceful command and control measure is needed. In truth, if Congress enacts binding measures to cap and reduce carbon emissions, coupled with the Renewable Fuel Standard (RFS) that already reduces carbon in transportation fuel, it is hard to see reason or merit for the LCFS. I ask you to take a very hard, realistic look at the implications of these overlapping major new proposed requirements. I strongly believe these combined measures overloads the packhorse.
I understand Congressman Jim Matheson may offer an amendment to climate legislation that would provide much needed transitional assistance to small business refiners. I encourage your very serious consideration of this important amendment. I strongly believe this kind of transitional help is essential to enable small business refiners to successfully manage a regulation of this magnitude.
I wish to raise one more key issue. The draft legislation contains measures punitive to Wyoming consumers who use fuel derived from Canadian tar sands oil. With regional crude oil fields in decline, several Wyoming refineries are required to process tar sands oil. Wyoming refineries (as well as those in Montana and Utah) do not have a crude oil pipeline connection to coastal ports or crude sources outside the region (except Canada). Hence, their supply options are limited. The proposed national transportation fuel greenhouse gas emissions baseline would penalize Wyoming refineries for processing tar sands oil, even though no other comparable quantity of oil is available in the area. In the end, the baseline would only add fuel costs to consumers beyond the costs of cap and trade, the RFS and the LCFS. In this instance, I suggest the Canadians are well able to manage their own carbon footprint. I urge you to strike the LCFS, which includes this baseline provision, altogether.
I look forward to working with you to resolve these concerns, and I thank you for considering my views.
Best regards,
Dave Freudenthal
Governor
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