UPDATE 3-Oil firms drop group lobbying for US climate bill
* Oil companies to continue lobbying for climate bill
* Companies said bill treats natural gas, fuels unfairly
* BP says bill would not create a liquid carbon market (Recasts, adds background)
WASHINGTON, Feb 16 (Reuters) - BP (BP.L) and ConocoPhillips (COP.N) will drop out of a group lobbying for the U.S. climate bill as proposed legislation would hurt the motor fuel and natural gas industries, the companies said on Tuesday.
The oil companies and Caterpillar Inc (CAT.N) said they will not renew their memberships in the U.S. Climate Action Partnership, or U.S. CAP.
The coalition of companies and moderate environmental groups formed a blueprint early last year outlining what they wanted in U.S. climate rules.
The blueprint helped steer climate legislation passed in the House of Representatives last June. But the bill has stalled in the U.S. Senate, amid opposition from oil and coal states, and faces an uncertain future.
BP said it still supports the blueprint which called for a cap-and-trade market on emissions blamed for warming the planet, but that the current legislation is plagued with problems that would penalize the petroleum industry.
"We would expect to see an increase in (oil) product imports, the closure of U.S. refineries, and the loss of jobs if we move forward with a poorly designed climate bill," said Ronnie Chappell, a BP spokesman.
President Barack Obama still wants a climate bill to cap emissions and Senators John Kerry, a Democrat, Lindsey Graham, and Joe Lieberman, an independent, are trying to hammer out compromise legislation. They are expected to unveil the bill next month.
In a move designed to advance legislation, Obama on Tuesday announced $8.3 billion in loan guarantees to help build the first U.S. nuclear power plant in nearly three decades.
And U.S. CAP still includes energy heavyweights like Shell Oil Co (RDSa.L) and Duke Energy (DUK.N), a big power generator, and General Electric Co (GE.N).
But withdrawal of the companies from the group, which now has 28 companies, is another blow to supporters of an energy bill that would limit emissions across all sectors, including the power industry, automobiles and heavy industry and force all of them to partake into a cap-and-trade market.
COMPETITION AND CAP AND TRADE
U.S. CAP said it expects U.S. action on climate this year and that it expects to add new members to the group in coming months.
But it has lost powerful friends in the oil companies who have complained that the bill would hurt U.S. refineries because they could face much tougher regulation than similar plants in developing countries.
Jim Mulva, Conoco's chairman and chief executive, said in a release that the bill passed in the House and climate proposals in the Senate would hurt the transportation industry and saddle drivers with higher fuel prices. He said domestic oil refineries would be "unfairly penalized" compared to their peers in developing countries which may not face strict emissions limits in an international climate agreement.
The bill also ignores the big role natural gas can play in cutting greenhouse gas emissions, said Mulva.
In addition, companies said the bill as written would not create a functioning cap-and-trade market on emissions.
Chappell said the bill would give too many free credits to to parties that would not need them to meet the emissions cap.
"The result will be a market that is volatile and the price on carbon will be volatile as well," said Chappell. (Reporting by Timothy Gardner; Editing by Marguerita Choy)
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