The American Petroleum Institute (API) recently took a break from hosting anti-cap-and-trade rallies for oil company employees, and used its spare time to put out a study claiming the American Clean Energy and Security Act (ACES) would be unfair to American oil refineries. Unfortunately their study uses some dubious assumptions – and makes some even more questionable claims.

API’s study (carried out by consulting firm Ensys Energy) outlines two major complaints.

• First, API whines that the bill only sets aside 2.25 percent of emissions allowances for refiners, while the electricity sector gets 35 percent of the available allowances.
• The second, related claim is that ACES would increase the cost of doing business so much that companies would turn to cheaper overseas refineries instead.

Before we even address those complaints, there’s one thing I have to point out — API is relying on bad modeling and cherry-picked results to create its case.

• The results quoted in API’s news release come from running a scenario that severely restricts international offsets and allows no expansion of low-carbon technologies beyond what would happen without a clean energy bill. There’s no basis for those assumptions, but they do manage to skew the results to make refineries look more vulnerable.
• However, if we consider the “basic case” (or, “most likely”) model outcome in Ensys’ report, it is clear that the activity of domestic refineries is expected to increase compared to their current levels.

But let’s ignore the study results for a minute, and just take a look at API’s two complaints.

First, API seems to think refineries are getting picked on because they aren’t getting as many free allowances as the electricity sector. But — they ignore the reasons why the two are not comparable.

• The electricity sector allowances they’re talking about actually benefit American consumers. The allowances are first handed to local distribution companies, or LDC’s, but the value of the allowances doesn’t stay there. LDCs are required to use the value of those allowances to protect consumers from electricity price increases. Giving allowances to the LDC’s really means giving allowances to American ratepayers.
• Oil refineries, in contrast, are private companies whose owners are free to pocket any money they get from their emissions allowances. So giving allowances to oil refiners really means — giving money to oil refiners. (API might like those two ideas equally, but no one else does.)

Of course, if the oil refiners were willing to accept the same regulations as utilities, and guarantee that their emissions allowances would be used to lower the price of a gallon of gasoline, that’s an idea worth discussing. API’s study doesn’t put that offer on the table, though.

Second, API says that America could become dangerously dependent on foreign refineries. (API President Jack Gerard says, "Climate legislation should not come at the expense of U.S. economic and energy security.")

But – U.S. refineries have cornered 90 percent of the market for domestic gasoline. Homegrown refineries dominate the market because there are, inherently, strong cost advantages for domestic production, and little incentive to send business overseas.

• Different states have different regulations governing oil refining, which favors local businesses and makes it difficult or impossible for foreign refineries to compete.  In fact, in other environmental scenarios, such as emissions standards for cars, industries claimed exactly that – no company could possibly create 50 slightly different products to sell under 50 different state rules, and only local businesses could thrive under those conditions.
• It’s also significantly easier and cheaper to ship crude oil than refined gasoline. That makes it much more efficient to import crude oil and do the refining right here at home. That’s a physical difference that won’t go away if we pass a clean energy bill.

EDF did our own analysis of the impact of climate legislation on oil refineries.  Here’s what we found:

• The expected added cost from a clean energy bill, per gallon of refined gasoline, is less than one cent per gallon.
• Analysis also suggests that refiners can be expected to pass on the majority of any cost increase to their customers.
• As a result, between 1.4 and 1.7 percent of total allowances would be enough to compensate domestic refineries – in full — for the added costs associated with reducing their process emissions.
• Since ACES allocates 2.25 percent of allowances to oil refiners, EDF believes the allocations set out in ACES are more than generous.

Given all this, the bill should not affect the competitiveness of American refineries.

A larger problem might be the unfortunate effect of API’s study on the average American consumer. Outside the industry, a lot of people don’t draw a distinction between “oil” and “gasoline.” A quick read of news articles about the study could imply that ACES will increase America’s dependence on foreign oil – when one of the most valuable aspects of the bill is that it will do just the opposite. Under ACES, the EIA predicts that the U.S. would reduce its consumption of oil by 344 million barrels in the year 2030 alone. That’s a vital benefit to our national security as well as our environment.

A whopping amount of our own oil and the imported oil would still be refined into gasoline here, in spite of API’s fears. After all, even their own biased study predicts increasing U.S. refinery activity.  All in all, clean energy legislation is still good for all Americans – including oil refineries.

Claim:

"[The American Clean Energy and Security Act] will come down hardest on the poor."

– Rep. Eric Cantor (R-VA), 6/26/09

Truth:

Actually, the non-partisan Congressional Budget Office says low-income Americans will benefit the MOST from this bill. The CBO calculations show that low-income Americans will actually see a net cash gain from this bill, as the value of emission allowances is rebated back to consumers.

In contrast, it's the cost of doing nothing that would fall most heavily on the poor: from greater health-care costs because of expanding disease vectors to the destruction of homes from catastrophic weather events , it's the poor who will disproportionately suffer.

Instead of disingenuously trying to hide behind the least fortunate among us, Mr. Cantor should step up and support this legislation — legislation that would create job opportunities across the economic spectrum. Most importantly, jobs that would provide pathways out of poverty for Americans who need them most.

Claim:

"This bill is a blueprint for unilateral economic disarmament of the U.S."

– Rep. Charles Boustany (R-LA), 6/26/09

Truth:

The American Clean Energy Clean Energy and Security Act will boost our economy by creating manufacturing jobs and investing in clean energy.

www.LessCarbonMoreJobs.org is an interactive website that analyzes the manufacturing jobs that are being created, and the many more that will be created under the ACES Act.

The ACES Act will also protect our families' wallets and electricity bills.

Claim:

"By most reasonable estimates we will lose jobs .. Look at Spain (for every job they gained, they lost over 2)"

– Nathan Deal (R, GA), 6/26/09

Truth:

The so-called "study" that Congressman Deal refers to has been widely debunked. Even that crazy lefty rag, the Wall Street Journal, did a story outlining the numerous ways in which it was flawed.

No big surprise there, though. Turns out the author of the study comes from a group funded by ExxonMobil.

The preponderance of economic impact studies point, instead, to the great potential for economic growth and job creation by shifting to a clean energy economy. That's why this bill is widely supported by both labor and business groups. They know that if all you ever do is all you've ever done, all you'll ever get is all you ever got.

Claim:

"This will impose a Pelosi global warming tax… almost $3000 per family"

– Rep. Phil Gingrey (R-GA), 6/26/09

"[The American Clean Energy and Security Act is a] Transfer of wealth bill .. [Americans will see] $1300 and $3100 in bills .. The taxpayer is the big loser"

– Rep. Marcia Blackburn (R-TN), 6/26/09

Truth:

OH FOR PETE'S SAKE.

How many times do we have to correct this falsehood? The claim that ACES will cost families "$3,100" was first made in a March press release from the National Republican Congressional Committee.

The NRCC said its number was based on an MIT analysis of cap and trade legislation. But John Reilly, the author of the MIT study, wrote a letter to the NRCC telling them their math was incorrect.

Reilly's comments on the $3100 claim: "It's just wrong. It's wrong in so many ways it's hard to begin." And yet, people keep using it.

Here are the accurate figures: an EPA analysis puts the cost of a carbon cap on at $88-$140 per household per year over the life of the program – or about a dime a day per person. The Congressional Budget Office did a separate analysis and got similar results. Both studies show we could get all the benefits of a carbon cap for less than the cost of a postage stamp per day per family.

Claim:

"66,000 Pennsylvanians will lose their jobs … How dare you do that to my constituents." — Rep. John Shimkus (R-IL)

Truth:

Well, last we checked, Rep. Shimkus represents Illinois, not Pennsylvania.

Either way, we urge Rep. Shimkus, and everyone else, to check our www.LessCarbonMoreJobs.org, which maps 2,000 companies across America posed to grow and add jobs under a carbon cap like the one in ACES.

Pennsylvania is one of the states with the most growth potential, since they already have the factories and skilled workers that will be needed to create the infrastructure for a new, clean energy economy.

By the way, Rep. Shimkus' own state of Illinois also has a lot of businesses that will benefit — although we appreciate his concern for the Keystone State.

But for a local view, talk to Mayor John Fetterman of Braddock, Pennsylvania. He's been working to get ACES passed because he sees it as the best hope for reviving his struggling steel town.

Claim:

"The point of this bill is to make fossil fuels more expensive … (the American Clean Energy and Security Act) Will only cause more economic hardship for farmers and small businesses." – Rep. Glenn Thompson, Jr. (R, PA-5), 6/26/09

Truth:

Rep. Thompson doesn't get it. The point of this bill is to curb carbon pollution, not unjustly penalize those that have carbon intensive industries.

Why else would companies whose bread and butter depend on fossil fuels support this bill? Small businesses support this legislation.

The ACES Act will help many small businesses, not hurt them. Thousands of companies are already working in renewable energy or energy efficiency sectors around the country, and this bill will create demand — and customers – for their products.

Manufacturers will also benefit. For instance, one wind turbine needs 8,000 separate parts, from ball bearings to wires to blades. We already have factories getting refitted to make these parts.

Claim:

"The EPA will tell our farmers how to manage their farms … this bill will tax you." Rep Frank Lucas — (R-OK), 6/26/09

Truth:

Rep. Lucas is wrong. This bill specifically prohibits agriculture from being regulated under a carbon cap, which means farmers will not be "taxed."

However, farmers will have the opportunity to voluntarily sell offsets, if they so choose. That will be a new income source for farmers who want to take advantage of the opportunity to reduce emissions from their operations.

What's more, under the terms of the Manager's Amendment, this program would be administered entirely by USDA — NOT by EPA — which is what a coalition of farm-state lawmakers wanted.

Claim:

(Under some provisions of the American Clean Energy and Security Act) "homeowners can be charged $100 a day for not being in compliance .. it's a new tax on homeowners" — Rep. Judy Biggert (R-IL), 6/26/09

Truth:

Here we go again with the phony cost estimates. The costs of the bill, according to EPA and CBO estimates, will be much closer to $100 per YEAR, not per DAY.

And still, climate action opponents, with no apparent regard for facts or honest debate, have repeatedly, purposefully, blatently, obnoxiously rehashed the $3100/year figure even though the MIT economist who's study was apparently the basis for this claim has vigorously refuted it.

Where do climate action opponents get their marching orders? Kafka?

In truth, this bill would establish strong targets for energy efficiency in homes and commercial buildings — and then have states, local governments and building-industry professionals tailor local codes to meet those targets, using the same processes they already use today.

In no way does the bill suggest homeowners would be subject to fines. That's just fiction. Rather, enforcement would remain a local matter just as it is today.

Furthermore, the bill says that new efficiency measures must be cost-effective, meaning the savings homeowners and businesses will see on their utility bills must outweigh the cost of the measures. This will help keep down costs down and reduce our national energy use all at the same time.

Claim:

"The CBO and API say that gas prices are going to go up 77 cents a gallon" — Rep. Fred Upton (R-MI), 6/26/09

Truth:

American Petroleum Institute (API) does say the CBO analysis 'suggests' gas prices would rise 77 cents a gallon.

Unfortunately, the CBO report doesn't actually say anything of the kind — or 'suggest' it — or refer to it at all, really.

It's not clear where API got this, but it's certainly a shame Rep. Upton fell for it. A better estimate, from the EPA analysis, suggests gas prices will rise two-cents a year as a result of ACES. That's nothing compared to the astronomical jumps in prices that brought us $4-dollar-a-gallon gas last year.

Maybe API has more information on those increases — since they do represent the oil and gas industries.