Climate bill could slash U.S. fuel output: study

WASHINGTON Mon Aug 24, 2009 11:15am EDT

Marine One flies over an oil refinery, devastated by Hurricane Ike, near Houston, Texas, September 16, 2008. REUTERS/Kevin Lamarque

Marine One flies over an oil refinery, devastated by Hurricane Ike, near Houston, Texas, September 16, 2008.

Credit: Reuters/Kevin Lamarque

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WASHINGTON (Reuters) - U.S. oil refiners could cut output by as much as 25 percent and the nation's reliance on imported refined products could double in the next two decades if the House version of a climate bill becomes law, the American Petroleum Institute said on Monday.

Under the so-called cap-and-trade bill narrowly passed by the House of Representatives in June, refining output could plunge by as much as 4.4 million barrels per day by 2030 to 12 million bpd, the API said, quoting a study it commissioned by EnSys Energy.

Imports could account for up to 19.4 percent of consumption by 2030 under the climate law, the study said, up from a projected 9.6 percent if the law were not in place.

Investment in U.S. refineries could fall by as much as $90 billion by 2030, a decline of 88 percent.

The House bill aims to curb greenhouse gas emissions by 17 percent from 2005 levels by 2020, and requires polluters to get permits for the carbon dioxide they spew into the atmosphere.

Under the bill, refiners are responsible not only for the 4 percent of emissions released from refineries when processing crude oil, but also the gases emitted from use of fuels produced such as gasoline and heating oil.

Altogether, refiners would be accountable for more than 40 percent of emissions, forcing them to purchase the majority of their permits.

Industry would initially be granted free permits covering 85 percent of emissions. But the refining industry was allocated only 2 percent of the allowances, leaving them vulnerable to competition from foreign refiners not subject to the same costs.

Analysts have said the House bill could cripple refiners, particularly small, independent facilities already reeling from weak demand and improving fuel efficiency.

The Senate will work on its version of the bill in September.

(Reporting by Roberta Rampton in Washington and Ajay Kamalakaran in Bangalore; Editing by Marguerita Choy)

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