BP and ConocoPhillips are leaving a business coalition that played a major role in the crafting of climate change legislation that passed the US House of Representatives last year.
Conoco said Tuesday it is quitting the US Climate Action Partnership (US CAP) because climate legislation that has emerged from Congress thus far would place an unfair burden on US oil refiners and does not recognize the role that natural gas can play in reducing emissions of greenhouse gases.
BP confirmed that it too was pulling out of the group in comments to Dow Jones Newswires and other news media. Both companies are major producers of oil and natural gas and have extensive US refining operations.
The climate change bill adopted by the US House last year was widely criticized for granting 30% of the available greenhouse gas emission allowances free-of-charge to the coal-dominated electric utility sector while granting refineries a relatively meager 2% of the allowances.
The legislation was co-sponsored by Reps. Henry Waxman, a Democrat from California, and Edward Markey, a Democrat from Massachusetts. Similar legislation is currently stalled in the Senate.
Many in the oil industry had argued that refiners would respond to such a policy by scaling back their US operations, thus increasing US dependence on imports of crude oil and refined products (IOD Jul.22,p3).
The House plan also proposed granting just 9% of the available free allowances to local natural gas distribution companies.
That also came under fire from industry leaders who argued that gas will play a crucial role in displacing electricity produced by less environmentally friendly coal-fired power plants and in supplementing intermittent electricity output from wind and solar plants.
"House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing greenhouse gas emissions," Conoco Chief Executive Jim Mulva said in a statement released by his company.
BP spokesman Ronnie Chappel said his company also plans to leave US CAP. "We can be more effective if we show up in the discussion as BP," Chappell said, adding that BP is hoping for legislation that "sends the right signals to all energy producers and all energy consumers."
The departure of BP and Conoco leaves Royal Dutch Shell as the only major oil company among US Cap's 30 or so members. Major electricity producers AES, Duke, Exelon and NRG belong to the group as do automakers Ford, Chrysler and General Motors.
The Waxman-Markey bill drew heavily on a legislative blueprint that US CAP offered to Congress in early 2009. Among other things, the group recommended economy-wide cuts in greenhouse gas emissions to 80% less than 2005 levels by 2050.
It also called for a "cap-and-trade" mechanism to achieve that goal, rather than a carbon tax which was favored by some oil industry leaders, such as Exxon Chief Executive Rex Tillerson (IOD Mar.6,p2).
The organization also called for downstream sources -- like refiners and gas utilities -- to be made responsible for curbing carbon emissions, arguing they were best-placed to pass along the cost of compliance to consumers.
Mulva said Conoco remains supportive of a "federal legislative solution for mandatory reduction of greenhouse gas emissions" despite its exit from the climate partnership.
But he said leaving US Cap will allow Conoco to "better focus its efforts on ensuring fair and equitable treatment of the transportation sector and its consumers, and on expanding opportunities for greater near-term greenhouse gas reductions through increased use of natural gas."
Lauren O'Neil, Washingto
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