The two top officials of the trade association American Fuel and Petrochemical Manufacturers came out with knuckles bared on Sunday in favor of less government regulation and fair treatment for domestic downstream industries.
At a press conference ahead of the 110th annual meeting of the association -- previously known as the National Petrochemical & Refiners Association -- AFPM President Charles Drevna strongly protested moves to eliminate oil and gas companies from receiving the benefits of the Section 199 tax break given to manufacturers, as well as the provision that limits the oil and natural gas industry to a 6% deduction on qualified domestic production compared with other manufacturers who were given a 9% deduction.
"We ask for no preferential treatment and shouldn't be subject to discriminatory treatment," Drevna said. He protested that "a donut maker out of Boston should have preferential treatment and [Congress does] not give that same sort of treatment to refineries ... Don't let politics override the facts."
Hammering away at the theme that refineries cannot compete as a result of government regulation, Drevna also conceded that several large East Coast US refineries that have closed or are likely to close "were caught in an economic and regulatory vise they couldn't extricate themselves from."
But he also said that mandatory renewable fuel usage is combining to make refineries less profitable.
"If you take away 10% of the market right away because of renewable fuels, with the anticipation of taking another 12% away by 2022, it's pretty hard for any industry to say we'll lose 22% of our market and still effectively run those refineries," he said.
In the last five months in Pennsylvania, Sunoco's 175,000 b/d Marcus Hook refinery and ConocoPhillips' 185,000 b/d Trainer refinery has closed, along with Hess' 350,000 b/d Hovensa refinery in the Virgin Islands. Sunoco also said its last operating refinery, a 330,000 b/d plant in Philadelphia, will close by July if no buyer is found.
"We need a lot more scrutiny of the cost-benefit of the regulations we face," AFPM Chairman James Mahoney said at the press conference.
Instead, Drevna urged US legislators to "look at the regulations ... look at renewable fuels and Tier 3." Tier 3 gasoline regulations are a pending change in gasoline specifications that EPA Administrator Lisa Jackson recently said will require only reductions in sulfur content of gasoline and tighten the requirements on fuel volatility, something industry groups have said would lead to higher costs.
The federal government "wants us to decrease greenhouse gas emissions from refineries but put more robust treatments at refineries that will increase greenhouse gases," he said. "They want us to work with the EPA [US Environmental Protection Agency] on Tier 3 ... standards, and so we'll do something with sulfur at a cost almost twice as much to do the last 10% as it was to do the first 90%."
In addition, "they want us to make gasoline that can fit the new ... vehicles that will come out to meet these CAFE [Corporate Average Fuel Economy] standards that will [have] four-cylinder, high compression engines," said Drevna. But "to meet that, they'll have to make premium gasoline, but all the rules are making it difficult to make premium gasoline."
When Congress drafts such legislation, "they look at it in a vacuum," he said. "We have to look at it holistically."
Meanwhile, when asked about the controversial subject of US product exports, which have been increasing at the same time that gasoline pump prices have risen, Mahoney also said it was better to be able to maximize refinery usage. "We operate highly complex facilities," he said. "They are most cost-efficient when they're highly utilized ... You'd want to take advantage of those assets."
Drevna said that when gasoline is made, diesel is also produced. "Other nations [whose] economy is coming up a little faster than ours need diesel and we can provide it very efficiently," he said.
"You've heard, 'tax the exports'," he said. "I've never heard of making a commodity more available by taxing it." He noted that even the US Supreme Court in a 1999 case called that unconstitutional.
"We're keeping Americans working, running refineries more efficiently and lowering the imbalance of trade," said Drevna. He cited US President Barack Obama in a recent speech to the nation in February as saying that exports were a "bright light in our economic condition, and went on to say that refined petroleum exports have been a major component of that."
"There [Obama] and I agree that what's good for the nation is good for consumers," said Drevna.
