NPRA's Drevna sounds warning at House oil vulnerability hearing

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Apr. 29 -- National Petrochemical & Refiners Association Pres. Charles T. Drevna warned of serious economic consequences if Congress tries to mandate nonpetroleum transportation fuels, while other witnesses urged a US House subcommittee to do essentially that.

“Members of NPRA are not ‘anti-clean energy,’” Drevna testified before the House Energy and Commerce Committee’s Energy and Environment Subcommittee. “They’re not ‘anti-green jobs.’ They are simply believers in an energy policy based on sound economics and sound science rather than science fiction,” he said.

“They want to provide jobs that are well-paying, long-lasting, and that strengthen our nation’s economy. And the operators of refineries and petrochemical plants want to keep their own domestic manufacturing operations—and manufacturing by others in the US—strong and thriving,” he maintained.

Drevna said it can’t be disputed that petroleum-based fuels are abundant, easily affordable, and very efficient. “Until alternative energy sources can make that claim, we not only should, but must and will continue to use these resources wisely and efficiently for decades to come,” he said.

But other witnesses argued that continued strong US reliance on oil for transportation fuels poses economic, security, and environmental risks that should not be ignored. FedEx Chief Executive Frederick W. Smith said when crude and gasoline prices climbed in 2008, consumers’ reduced purchasing power and cash flow forced many homeowners to walk away from their re-set subprime home mortgages.

‘Match lit fuse’
“The rise in oil prices was the match that lit the fuse of the mortgage mess and the subsequent recession,” Smith said in his written statement. “The US economy lost more than 700,000 jobs between December 2007 and the beginning of September 2008, and the unemployment rate increased from 4.5% to 6.1%, all before the financial crisis truly hit later in September.”

Smith said in 2008, US consumers and businesses spent more than $900 billion on refined oil products, or 6.4% of US gross domestic product. “Today, prices are off their highs. But for how long? Oil is back above $80/bbl,” he observed. “Many of the underlying fundamentals that pushed oil prices up are still present today, and once demand—temporarily reduced due to the recession—begins to pick up again, prices are likely to follow. Our oil dependence could strangle an economic recovery just as it is beginning to take hold.”

Electricity would provide a diverse, domestic, stable, and fundamentally scalable transportation energy supply instead, he said.

Jason Wolf, president of Better Place, a Palo Alto, Calif.-based supplier of electric vehicles and services, told the subcommittee the permanent solution to volatile oil prices is to disconnect US transportation, and consequently the domestic economy, from oil dependence. “This also happens to be the only permanent fix to ills as diverse as our trade deficit, global warming emissions, and national security,” he said in his written statement.

Converting the domestic transportation fleet to electricity “breaks the stranglehold of petroleum…and opens up a full menu of power sources, including zero-carbon resources,” Wolf continued. A global transition from petroleum is being led by governments that have chosen electrification and followed through with policies to make the transition, he said.

“America’s reliance on oil is our Achilles heel,” said Robert Diamond, a retired US Navy lieutenant and a Truman National Security Project fellow. “I fundamentally believe that a comprehensive energy strategy—one that cuts our addiction to fossil fuels, boosts clean energy technology, and moves our nation dramatically towards energy independence—is vital to our national security, to the safety of our men and women in uniform, and to the fight against terrorism,” he said in his written statement.

Navy secretary’s goals
Noting the US Department of Defense is the nation’s largest energy consumer, Diamond cited a May 2009 report by the Center for Naval Analysis that a $10/bbl rise in oil’s price costs DOD more than $1.3 billion/year. He said US Navy Secretary Ray Mabus established a goal of creating a carrier battle group powered by renewable energy sources, including nuclear power, by 2012, and generating half the power at the Navy’s shore installations from wind, solar, geothermal, and other renewable sources by 2020.

Current technologies could go a long way toward reducing US oil dependence, US Environmental Protection Agency Administrator Lisa P. Jackson told the subcommittee. She said that at the request of US Sen. John F. Kerry (D-Mass.), EPA conducted a scoping exercise to identify potential reductions in oil consumption and greenhouse gas emissions from deploying those technologies.

Doing so in a widespread manner would reduce GHG emissions from US transportation by 600 million-1 billion tonnes and oil use by 4-7 million b/d by 2030 from their projected levels, according to Jackson. The numbers represent cuts of 25-40%, she indicated. “EPA’s analysis highlights that, while we have started addressing these twin challenges, we have the potential to do much more,” she told the subcommittee.

Drevna said he was not arguing for an all-petroleum future or saying that the US should consume as much petroleum as possible as quickly as possible. “NPRA supports clean energy and policies that enhance energy efficiency,” he said. “We also believe the US requires an energy portfolio that is as broad as possible, encompassing both traditional sources such as petroleum, coal, and nuclear energy, and supplemental sources ranging from wind to geothermal to biofuels.

“What we do not support are government policies that are counterproductive, unrealistic, and economically harmful to American families and businesses,” Drevna continued. “Decisions regarding our nation’s energy policy need to be based on sound economic theory rather than theories that simply sound good. And these decisions need to be protective of environmental goals.”

Contact Nick Snow at nicks@pennwell.com.



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