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The high cost of overregulation

02.01.2012  |  Drevna, Charles T. ,  American Fuel & Petrochemical Manufacturers, Washington, DC

The US does not need to choose between healthy environment and healthy economy when it can have both.

Keywords: [economy] [environment] [AFPM] [US] [American] [refiners] [NPRA] [investment]

Just about everyone favors protecting the environment, but few have done as much as the members of the American Fuel and Petrochemicals Manufacturers (AFPM) to improve the US’ air and water quality.

Members of AFPM (formerly the National Petrochemical and Refiners Association, or NPRA) are strongly committed to environmental protection. We have an outstanding record of compliance with the Clean Air Act, and have invested hundreds of billions of dollars to dramatically reduce emissions as measured by the US Environmental Protection Agency.

As a result of our emissions reductions and reductions by other industries, the US’ air today is cleaner than it has been in generations.

EPA data shows that total emissions of the six principal air pollutants in the US have dropped by 57% since 1980 and ozone levels have decreased by 30%. These reductions occurred even as industrial output has increased. And the EPA expects there will be continued reductions in the years ahead under regulations already in place.

Today, US refiners manufacture the cleanest fuels in the world and emissions are lower than anywhere else. Our products and facilities are cleaner than those in any other nation. Our investments have resulted in significant cuts in sulfur levels in gasoline, reducing them by 90% just since 2004.

Between 1996 and 2005, refiners cut emissions of chemicals listed under the Toxic Release Inventory by 36% and reduced emissions classified as hazardous air pollutants by 50%. The comparable reductions by chemical manufacturers in the same time period are 61% under the Toxic Release Inventory and 64% of hazardous air pollutants.

Despite the great progress that has been made, we are concerned that the EPA and other government agencies have moved from reasonable regulation to overregulation that makes unrealistic and often conflicting demands on fuel and petrochemical manufacturers. These demands frequently have little or no significant environmental benefit but cost millions, and even billions, of dollars to meet, increasing energy costs for US consumers.

One example is the proposed rule by the EPA to further reduce sulfur levels in gasoline. EPA is proceeding with what is known as a Tier 3 rulemaking as part of its general authority to regulate fuels under the Clean Air Act. The rule could lead to significant domestic fuel supply reductions, higher petroleum product imports, increased consumer costs, increased refinery emissions, the closure of US refineries that would leave their workers unemployed, and reduced energy security.

Another example of overregulation involves gasoline containing 15% ethanol, or E15. EPA decided to allow E15 to be sold into the marketplace for use in cars and light trucks produced in model year 2007 and later, and then for model year 2001 and later. In addition to being what we consider a violation of law, these decisions hold the potential to create significant problems in the marketplace, including misfueling and engine damage.

The impact of overregulation is clear to see. A Department of Energy report issued in 2011 found that refining margins have been continuously decreasing over the past four years. The report also concluded that the compounded burden of federal regulations was a significant factor in the closure of 66 petroleum refineries in the US in the past 20 years.

Just since 2008, the recession and refinery closures have led to 3,000 lost jobs at US refineries. A handful of refineries are threatened with closure in the near future if they cannot be sold. Although some of the lost supply from shuttered refineries has been made up through capacity expansions at other facilities, the rate of new capacity coming online is decreasing due to financial pressures and the threat of overseas competition.

Those lost American jobs aren’t simply disappearing, they are moving overseas to foreign competitors not strangled by burdensome environmental and other business overregulation.

Foreign industries emit greenhouse gases (GHG) into the common atmosphere that every nation on Earth shares. GHG emissions produced in China have the same impact on our environment as emissions generated in the United States. Simply shifting emissions from the US to other nations has absolutely no environmental benefit, but great economic cost here at home.

Sadly, today’s environment of overregulation serves only to strengthen foreign competitors eager to replace US manufacturers and workers. It will continue to weaken the US economy, make the US more reliant on nations in unstable parts of the world for vital fuels and petrochemicals, and endanger our national security.

The US does not need to choose between a healthy environment and a healthy economy that provides more jobs for our citizens. We can have both. We are not calling for a repeal of existing environmental regulations that have led to major improvements in our environment and that will lead to continuing environmental improvement without further change.

We are calling for reasonableness and common sense. It is unreasonable to say that the US will spend billions of federal tax dollars to subsidize inefficient and unpopular new energy sources, deprive many thousands of workers of their jobs, and severely damage the US’ economic and national security in the overzealous pursuit of small emissions reductions that have little or no significant environmental benefit.

Instead of serving the US people, such environmental extremism does far more harm than good. Our government needs to use objective analysis to determine when the costs of overregulation exceed the benefits, and to act in the best overall interest of people in the US. HP

The author 

Charles T. Drevna is the president of the American Fuel and Petrochemical Manufacturers (AFPM), a national trade association with more than 450 members, including those who own or operate virtually all US refining capacity and most all petrochemical manufacturers in the US. Prior to his election as president in 2007, Mr. Drevna served as AFPM’s executive vice president and director of policy and planning. Mr. Drevna has an extensive background in energy, environmental and natural resource matters, with more than 36 years of broad energy industry experience in legislative, regulatory, public policy and marketplace issues. Prior to joining AFPM, Mr. Drevna served as director of state and federal government relations for Tosco, Inc., the nation’s largest independent petroleum refiner, where he was responsible for liaison with Congress, federal regulatory agencies and state governments. Mr. Drevna also served as director of government and regulatory affairs for the Oxygenated Fuels Association, where he held similar responsibilities, and as vice president at Jefferson Waterman International, a Washington, DC-based consulting group, where he specialized in domestic and international energy issues. Mr. Drevna also served as vice president of public affairs at the Sun Coal Co., a Knoxville, Tennessee-based unit of Sun Co., Inc. (Sunoco), and with the parent company as manager of public policy at its corporate headquarters in Philadelphia, Pennsylvania. Mr. Drevna has a significant background in environmental management that includes service as director of environmental affairs for the National Coal Association in Washington, DC, and as supervisor of environmental quality control for the Consolidation Coal Co. in Pittsburgh, Pennsylvania. He received his BA degree in chemistry from Washington and Jefferson College and performed graduate work at Carnegie-Mellon University. 

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eduardo cao

The main environmental threat that humankind is facing is greenhouse gases emission. All fuels produced in refineries end their lifes as CO2. And the only way to stop this contamination is to reduce fuels consumption. The important thing is to produce and use less fuels and not to increase fuels production with cleaner technologies.

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