Conoco’s Mulva likes the sound of the new US energy bill

A new climate bill in the US senate that puts a tax on oil companies might be expected to raise howls of protest from the industry, but ConocoPhillips’ chief executive Jim Mulva likes the sound of the bill expected to be published by senators John Kerry, Lindsey Graham and Joe Lieberman.

He may not agree with everything in the senators’ plan. But given that carbon dioxide emissions need to be controlled, he believes the senators’ plan is likely to be clearly superior to the other options. In particular, it looks much better for the oil and gas industry than the Waxman-Markey bill passed in the House of Representatives last year.

The most striking thing is that he is backing something that looks very much like a carbon tax.

Speaking to the FT recently, Mulva said that ConocoPhillips, along with fellow oil and gas groups BP and Royal Dutch Shell, had been talking to the three senators to make the industry’s case. He was strongly critical of Waxman-Markey for putting most of the burden of paying for emissions reduction on to oil refiners, while the power industry – backed by the powerful coal lobby – was largely given a free pass. As he put it:

Waxman-Markey we believe is a flawed piece of legislation. It certainly disadvantages natural gas, and does not fairly treat the refining side or the transportation fuels side of emissions.

That concern was behind the decision by Conoco and BP – although not Shell – to pull out of US CAP, the business campaign for emissions reduction legislation in the US. The oil companies still want carbon dioxide controls, they say, but they do not like the only legislation yet agreed to put those controls in place.

Nor does Mulva like the idea that the EPA should regulate carbon dioxide emissions, which it has power to do.

We also look at EPA regulation, and it’s not just our company, I think all industry looks at this as not the right approach to addressing CO2 emissions.

So if both alternatives are unpalatable, he says, the industry needs another way:

Waxman-Markey is a flawed piece of legislation, [we] don’t want EPA to be putting the rules on with respect to how to address CO2 emissions. So legislation is something that at some point in time is most likely needed.

The industry’s agenda for the three senators, he adds, is pretty straightforward:

A fair level playing field for natural gas, and treat the refining sector in a way that’s equal and in balance with other industries.

That leads him to back the idea that seems to be coming out of Kerry-Graham-Lieberman, which is separate treatment for the electricity generators, the refiners, and manufacturers. What that would mean for refining is something that looks as much like a carbon tax as cap-and-trade:

We like the idea of cap-and-trade for large stationary sources [such as refineries], with a linked fee. For period of time [there would be] a corridor, determining that that market is $30 per ton [of carbon dioxide]. You take $30 per ton, and you convert it to how many cents per gallon for gasoline and diesel. And then whether you manufacture it, it comes out of the refinery and is sold at the rack, or you import it, that fee is assessed on each gallon. Whether it’s imported or manufactured, you put a price on carbon, and then you don’t go to the individual consumer and put them under cap-and-trade, you promote that there is a price of carbon, it’s very transparent, it should lead to efficiencies, and it’s a fair playing field.

He concluded:

Those are some of the principles that are really important. So the idea is: whatever was flawed in Waxman-Markey, maybe you can work that out through some of the initiatives with the Senate. Whether something like that ultimately gets passed or not, [and] I am not so sure it is this year, but at some point in time there will be a piece of legislation that starts to go forward. Because we really don’t think the EPA is the right place to be regulating CO2 emissions.

Cynics might suggest that Conoco is coming round to this carbon tax type idea – which will push up the price of petrol for American drivers – because the company believes it will not happen, and the American Petroleum Institute has certainly indicated that it favours such an approach because it can highlight the climate tax to drivers. But that argument is much easier to make with Exxon than it is for Conoco, which has been one of the leading oil companies arguing for action on the climate.

If the senators can get the oil and gas industry to line up behind them, then the prospect of a historic US energy and emissions bill will get that bit closer.

Related links:

Oh, so that’s why you want a gasoline tax - FT Energy Source
The US climate bill obstacles: The 10 anti-drilling senators, and more – FT Energy Source
Cap-and-trade is/isn’t dead -and what it could mean
- FT Energy Source
Cap-and-trade: Perennially unpopular - FT Energy Source
Cap-and-trade versus everything else – FT Energy Source

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