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Letter: Are we positioning American for success in era of energy abundance?

Hydrocarbon Engineering,


Below are highlights from a letter written by Charles T. Drevna, President, American Fuel and Petrochemical Manufacturers to Chairman Ed Whitfield and Ranking Member Bobby Rush of the US House of Representatives. Drevna’s letter is in response to the Energy and Power Subcommittee Hearing entitled, ‘The Energy Policy and Conservation Act of 1975: Are We Positioning America for Success in Era of Energy Abundance?’

“The AFPM applauds the Energy and Power Subcommittee for holding a hearing to examine the impacts of our nation’s outdated energy laws, something we believe is long overdue. When Congress enacted the Energy Policy and Conservation Act of 1975 (EPCA), the US was reacting to the 1973 oil embargo that created significant problems for the US economy. Although much of the economic upheaval was self induced by federal interference in the market via price controls and production limiting distortions that in essence turned a manageable nuisance into a major event, EPCA established a federal energy policy that was designed to protect the nation from supply disruptions. Among many other things, EPCA placed a ban on the export of crude oil from the US.”

“AFPM’s posotion is that a free market should drive all US policy, including energy policy. While we do not oppose lifting the existing restrictions on US crude oil exports, we believe Congress should look at all barriers to the free market, including the Renewable Fuel Standard (RFS) and the Jones Act. Taking a holistic approach in such a way will ensure policies are not advanced in a manner that would not only disadvantage domestic refiners in a global market place, but could ultimately result in severe economic disruption for large regions of the nation. I am confident that you will agree that the nation cannot afford to repeat the miscalculations of 1975 where energy policy was established without a full understanding of the entire dynamic.

“The US faces major changes in our energy markets with little history to guide us on how to adapt to those changes. Today, domestic petroleum supply, disruption, storage, refining and demand are all making large shifts, greater than at any other point in our history. In order to have a meaningful discussion on our energy future, policymakers must consider how lifting the ban affects all parts of production, distribution and refining. Along these lines, the debate should be informed about the facts regarding US capacity to refine additional domestic crude oil. One common misconception is that there is currently a glut of light crude oil and that the US has maxed out on its ability to process this supply. The reality is that such a glut does not currently exist. Utilisation adjustments and new investments alone will allow the domestic refining complex to process at least an additional million bpd of crude light oil. This figure does not take into account our ability to continue backing out existing imports of light sweet crude oil. In short, there is plenty of room for processing light sweet crude oil in our domestic refining complex and this capacity is likely to grow further. Policy discussions on modernising our energy laws need to recognise this reality and its positive implications for US energy security.”

“Today, shipping crude oil via a Jones Act ship costs a US refiner about US$ 5 – 6 /bbl compared to just US$ 2 – 3 /bbl from a non-Jones Act ship intended for a European port. This puts domestic refiners at a significant disadvantage, especially when you consider the potential regional disparities this policy inventivises. Several years ago, East Coast refineries, representing over half of the region’s refining capacity, faced closure due to rising crude oil feedstock costs and increasing competition from imported transportation fuel. However, the low cost of US oil production from the Bakken region has been instrumental in keeping the remaining refineries competitive. Because domestic refiners operate in a global market, lifting the crude ban without addressing the Jones Act will give foreign competitors access to US crude more cheaply than US East Coast refiners, once again putting those refineries in jeopardy.”

“In addition to the Jones Act, US refiners are also subject to the broken mandates in the RFS, another policy that inhibits a free market and should be examined when reviewing the export ban. This law requires refiners to blend increasing amounts of biofuel into the US fuel supply regardless of consumer demand, what existing vehicles and infrastructure can safely handle, or if the fuels even exist in viable, commercial quantities. Foreign competitors do not face the lopsided cost and compliance scenarios that domestic refiners face with respect to this ill crafted and harmful mandate.”

“The US has an opportunity to become the world’s top energy producer and realise a manufacturing renaissance, but only with policies that promote the free market. Congress, therefore, should pursue US policies that promote a free marketplace for all competitors and we look forward to working with you to address all anti competitive policies.”


Edited from a letter by Claira Lloyd

Read the article online at: https://www.hydrocarbonengineering.com/refining/11122014/letter-drevna-to-congress-us-law/


 

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