With the Obama administration trying to make the environment its legacy, this year promises to be a very busy 12 months for the fuels, petrochemicals and refining industries. Although there already have been some excellent summaries, here are AFPM’s predictions for the key industry issues of 2015:
Waters of the United States (WOTUS)
Expected to be released in April, EPA is working on a final rule to define what constitutes the Waters of the United States under the Clean Water Act. The rule would cover smaller watercourses—streams and rivers—that flow into the larger bodies of water already covered by the Clean Water Act. While the rule would appease environmentalists, the key concern is that the administration is engaging in a “land grab” and forcing regulation upon even the smallest pools of water: the WOTUS rule could even stop farmers from digging ditches or draining ponds.
An intractable issue that serves as a metaphor for the larger fossil fuels vs. extreme environmentalism debate, Keystone XL returns to the Senate this week. Despite the best efforts of Senator Mary Landrieu (among others) in November, the pipeline has still yet to receive Congressional approval—even though it has the potential to create 42,000 jobs, contribute billions of dollars to the U.S. economy, and improve North American energy security. With amendments to be allowed on the latest version of the bill, we expect Keystone XL to be as prominent in 2015 as it was in 2014.
Along with the WOTUS rule, EPA is also aiming to set new emissions limits on existing fossil fuel-burning power plants by July. The agency’s rule aims to cut carbon emissions by 30 percent by 2030 – a target which the U.S. Chamber of Commerce estimates could result in the loss of 220,000 jobs, hit household disposable income by more than $550 billion per year and wipe $50 billion per year from the U.S. GDP. The limits would also deliver a severe blow to the U.S. coal industry.
2015 is clearly going to be a busy year for EPA. The agency is expected to issue final standards for ozone pollution levels in October, which could be the most expensive regulation ever. A National Association of Manufacturers report concluded that the rule could cost millions of jobs, $2.2 trillion in compliance costs, and cost $3.4 trillion in lost GDP between 2017 and 2040. As the U.S. emerges from one of the worst recessions in decades, imposing stringent ozone rules – before the current regulations have even been fully implemented – would severely affect America’s manufacturing industry, and be a significant self-inflicted wound on the the U.S. economy.
Renewable Fuel Standard (RFS)
A broken policy that does more harm than good, the RFS limps on into 2015 following a disastrous 2014. Already more than a year late on producing the 2014 rule, EPA Acting Assistant Administrator Janet McCabe then declined to tell an exasperated House of Representatives committee when the 2014, 2015 and 2016 regulations would be ready—apart from a vague pledge to issue them this year. As refiners continue to guess how much ethanol they should be blending into their fuels, the appearance (or non-appearance) of even a single RFS rule will be a significant development this year.
Given the significant growth in the amount of crude traveling by rail—rising from 9,500 to 400,000 carloads from 2008-2013—new Department of Transport regulations on tank cars are expected in March. The regulations will cover the replacement (and retrofitting) of older cars with newer models that have thicker walls.
The fact that methane emissions have plummeted—4.7 percent between 1990 and 2008, and a further 6.3 percent from 2008 to 2012—hasn’t stopped the Obama administration from wanting to regulate it anyway. The drop in methane emissions has been particularly marked in the drilling industry (14.3 percent reduction from 2008-2012), but despite this EPA is expected to announce regulations to restrict emissions at some point this year. True to form, EPA had planned to announce the rule last year—but decided in December to punt it into 2015.
Highway Trust Fund
As gasoline prices continue to fall, the possibility of a hike in the gas tax has reared its head again. While care must be taken to ensure any potential tax increase is appropriate to address spending needs—as well as ensure that any new revenue generated would be dedicated to fund highway programs—as long as gasoline prices fall, raising the gas tax will be on the agenda in 2015.
EPA Mercury and Air Toxic Standards (MATS)
Power plants are expected to begin complying with EPA’s controversial MATS regulations this year, although the Supreme Court announced in November last year that it was to review the standards. Considered by many to be very aggressive regulations, the cost to companies of complying is expected to reach $9.6 billion.
Low Carbon Fuel Standard (LCFS)
Taking their cue from California, debates on the costly LCFS are set to happen in both Oregon and Washington in 2015. Apart from the fact that implementing any LCFS regulation would increase consumer costs and destabilize U.S. energy security by discriminating against Canadian oil sands and domestic unconventional petroleum sources, the LCFS relies upon the increased use of alternative fuels that are either unproven or simply unavailable in the quantities necessary to make the program viable.
Toxic Substances Control Act (TSCA)
While both the petrochemicals industry and the green lobby agree that TSCA is in need of reform, opinion sharply divides on what this reform should look like. Any radical overhaul of the act could jeopardize U.S. competitiveness and send American jobs overseas, so industry prefers a reasonable modernization of TSCA. Although draft proposal for TSCA reform collapsed in September last year, 2015 will be a big year for TSCA as awareness about the act increases.