Incoming AFPM president outlines challenges ahead

When incoming American Fuel & Petrochemical Manufacturers Pres. Chet Thompson expresses concern that the US Environmental Protection Agency is acting too aggressively, it’s not because AFPM’s refining and petrochemical member companies can’t handle government oversight.

No other US industry is more regulated in both its processes and products, he told OGJ in a recent interview. Referring to his years chairing the Environmental and Natural Resources Group in Crowell & Moring LLP’s Washington office, Thompson added, “I don’t know of any of my other industries’ clients there who were as committed to safety and environmental compliances.”

The Obama administration’s focus on reducing carbon emissions to address global climate change means refineries and petrochemical plants will remain heavily regulated, he said. “We’re not just complaining about that,” Thompson said.

In actions such as its recent expansion of the Waters of the United States definition, “EPA’s assertion of authority is unprecedented. These will be monumental undertakings, and states will have to implement all of them,” he said.

Thompson doesn’t oppose states having to do this because he feels they are most familiar with local conditions, he told OGJ. “The problem is that EPA is dictating, not delegating,” he said. “It shows in the states’ responses. They’re concerned about limited budgets and timeframes. Twenty-one states say EPA’s ground-level ozone proposal is too stringent, and its earlier rule hasn’t been fully implemented.”

A former deputy general counsel and associate deputy general counsel at EPA during 2004-06, Thompson said his advice to the agency now would be to issue rules on time under authority it has been given. “If it did that, things would be better for our states and for our members,” he said.

RFS problems

Speaking the day before EPA proposed biofuel quotas for fiscal 2014, 2015, and 2016 for refiners to meet under the federal Renewable Fuel Standard (OGJ Online, May 29, 2015), Thompson said he hoped they would reflect the E10 blendwall and future ethanol volume requirements would not exceed the current 10% level in gasoline. “Our key message to EPA was that it has the authority to adjust the standard for that purpose,” he said.

But AFPM would like to see RFS repealed, and it’s not alone in this, he noted. “The food industry, engine manufacturers, and environmental community have similar aspirations,” he told OGJ. “Add to that data demonstrating the ethanol mandate is not good for the environment, and it’s surprising how long it has taken for support to grow. I find it ironic that the amount of land devoted to corn for ethanol is equal to carbon dioxide emissions from 34 coal-fired power plants.”

When it comes to calls for the US to repeal its 1975 ban on crude oil exports, Thompson said AFPM backs free-market policies, but would like to see it come following a full discussion of the Jones Act and other laws which interfere with these principles.

“We shouldn’t have a situation where we can’t get crude we produce to domestic refineries, or where it costs more to ship it from the Gulf to East Coasts than it does to Europe,” he said in reference to the Jones Act. “We know [having this discussion] will be difficult, but we find there’s more interest in looking at this issue than in the recent past.”

Safety considerations emerging from growing crude-by-rail shipments also must be addressed on the tracks as well as within refinery fence lines, Thompson said. “It’s important for facts to be out there,” he noted. “Our members spent $4 billion since 2011 to upgrade tank cars. They put their money where their mouth is to ensure safe transportation of crude by rail.”

It’s time now for others to do their part because track integrity and human error cause the overwhelming majority of derailments, Thompson said. He considers calls to treat crude prior to shipment to make it less volatile a red herring since modern tank cars already handle liquids more volatile than Bakken crude. “Stabilization won’t keep trains on the tracks. We need to talk about track integrity and human error,” he said.

Thompson said AFPM’s members recognize that significant challenges lie ahead. “The industry sees what’s coming,” he said.

Contact Nick Snow at nicks@pennwell.com.

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