Cap and Trade Bottles up State’s Lone Oil Refinery - State Journal

Story By Neil Stanton

Nestled between the quiet hills of West Virginia's Northern Panhandle and the Ohio River, south of Newell, is a small petroleum refinery built in 1972 by Quaker State Corp. In 1997, as Quaker State was looking to exit the refining business, Ergon Inc. purchased the refinery that is now known as Ergon-West Virginia Inc.

The company has since invested over $150 million in equipment, technology and pollution prevention upgrades to keep the facility competitive and preserve local jobs the area so desperately needs. Ergon-West Virginia is the only operating oil refinery left in West Virginia and processes local crude oil from West Virginia, Ohio and western Pennsylvania.

Ergon is a private company owned by the Lampton family with corporate headquarters in Jackson, Miss. It has several operations in the tri-state area, including the refinery, Ergon Oil Purchasing and Ergon Trucking, totaling more than 300 employees.

For fiscal 2008, Ergon companies paid more than $15 million in taxes to West Virginia and more than $5 million in West Virginia payroll. Payroll to employees living in Ohio was more than $8 million. Ergon pays more than $500 million each year to area landowners and oil producers for their crude oil. Sounds like the perfect situation for the valley: an out-of-state business investing millions in a local business to keep it open, more than 300 families supported with good pay and benefits, millions in tax dollars paid to the state every year, plus tri-state oil sold at a good price to a local manufacturer and turned into valuable products.

So why would our government in Washington, D.C., want to pass climate-change legislation that could "bottle up" a company like Ergon-West Virginia Inc. that is so committed to the area and its citizens? H.R. 2454 American Clean Energy and Security Act, better known as the Waxman-Markey "cap-and-trade" bill, is a complex 1,300-plus page bill narrowly passed by the House (219-212) in June. Title III of the bill "caps" greenhouse gas emissions at 2005 levels, establishes a government program to allocate emission allowances, requires the emitter to either pay for, trade or offset them with reductions elsewhere and then lowers the cap from 2005 levels 3 percent by 2012, 20 percent by 2020, 42 percent by 2030 and 83 percent by 2050.

Most greenhouse gas emissions are carbon dioxide (CO2). Supporters of the bill say the intent is to reduce greenhouse gas emissions believed to contribute to global warming and to reduce dependence on foreign oil. Opponents say those objectives will not be achieved, and the added cost on energy will cause significant manufacturing job loss, weaken our economy and make us less secure.

Ergon strongly opposes H.R. 2454. The bill penalizes petroleum and puts small refineries like ours at a great disadvantage. If it becomes law, our plant will pay over $35 million for CO2 allowances starting in 2012. That is equivalent to 20-30 cents per gallon for gasoline and diesel. When allowance costs go up as projected, that figure will double or triple by 2020 and continue to increase as the CO2 cap comes down. Supporters of the bill claim oil companies can absorb these costs or pass them along.

Our plant can't absorb $35 million per year and continue to operate much less invest and grow. I don't think distributors and the motoring public are eager to pay that extra 30 cents per gallon at the pump either.

The cap-and-trade bill passed in the House provides some free credits for CO2 allowances in the early years. Industries like electric power generation and chemicals initially get 80-100 percent of their emissions free. Refining only gets about 5 percent and is responsible for all motor fuels sold. Transportation fuels were left out. Greenhouse gases that we emit at the plant only account for 10-15 percent of the allowances our refinery would have to buy. The other 85-90 percent is for vehicle emissions from the gasoline and diesel we sell. Regardless of whether that cost can be passed along to the consumer, it's still another tax on transportation fuel but disguised by charging the refinery.

Small refiners in the U.S. have great concern that plant shutdowns and loss of jobs will result from higher costs and foreign competition. Our refinery is ranked 120 in size out of the 143 in the country. Other plants our company owns are similar. This small size does not afford economy of scale and tradeoffs that multi-national refineries 10 times our size can generate. Even worse, unregulated foreign refiners like those in China and India will gain further advantage, driving small U.S. refiners out of business. Because of lower efficiency and fewer controls, they will emit more for the same unit output. Global greenhouse gas will increase from developing nations, but we'll be left with fewer jobs and higher energy costs at home.

Statistics from the American Petroleum Institute report that more than 1.7 million jobs in Ohio and West Virginia combined, or about 30 percent of all jobs in those states, are directly or indirectly supported by the oil and gas industry. The National Association of Manufacturers reports that both states will be among the hardest hit by cap and trade because of their industrial base.

We have hardworking, dedicated employees at our plant, and these are some of the best jobs in the area. Adding suppliers, services and related businesses, the number of people our plant supports is doubled or tripled. With high unemployment and shrinking industry in the valley, we can't afford to lose more good jobs.

Another issue of debate is national security. Cap and trade does not protect motor fuels from foreign competition that do not regulate greenhouse gas emissions. Lost refinery capacity in the U.S. will be replaced with more imports of finished products. Four years ago, when hurricanes Katrina and Rita hit the gulf coast and gas shortages occurred, the outcry was we don't have enough refinery capacity in the U.S. Gasoline imports already are double what they were 10 years ago. This bill drives more refining capacity out of the country. We may end up less dependent on foreign crude oil but more dependent on foreign gasoline and diesel imports. That can't be in our national interest.

Ergon-West Virginia is an environmentally conscious, good corporate citizen. Protecting our employees, the community and the environment are our most fundamental business objectives. We are committed to meeting or exceeding all the regulations and permits under which we operate. Since 2000, 60 percent of all our major expenditures, more than $70 million total, has been spent on environmental improvements. These investments have dominated our budget resulting major emission reductions from our plant and from those who use our products. More projects are on the books for regulations recently passed or in development. But if Waxman-Markey or anything like it comes out of the Senate and becomes law, it could be overwhelming for small refineries.

Climate change is a global issue, complex, controversial, sometimes emotional. We don't claim to know it all, but feel certain H.R. 2454 will be very costly to the economy, especially as we try to recover from a deep recession. We do know the bill puts a huge financial burden on petroleum that will be most difficult for small refiners like Ergon to bear. This deeply concerns all our employees, their families and others who depend on the operation of this fine plant. We have been working hard to make our congressional delegations in Washington aware of the negative impact it could have on the valley and surrounding tri-state area. We hope others in the community will join us in asking them to oppose cap and trade.

Neil Stanton is vice president-refining for Ergon-West Virginia Inc., Newell, Hancock County.

If CO2 is such a problem, we should find a natural means of absorbing the excess. Cannabis is a voracious consumer of CO2 and the answer to the entire issue.

If the Libs truly want a healthier and greener Earth, abolish cannabis prohibition! For the hippies, for the planet, and for the children.

Let the tax-mongers go on wanting.

To speltmelk: I apologize if you misunderstood me to be calling you names. I was referring to the celebrities and extremists who have pushed this to the public and political forefront.

I will however, with all due respect, call you wrong. I did not say CO2 is not a greenhouse gas. It is a greenhouse gas, along with many others. I said CO2 is not a POLLUTANT. Did you know the most abundant greenhouse gas in the atmosphere is water vapor? Should we call that a pollutant too? As I said originally, it is a public disservice to call CO2 a pollutant. Water vapor too for that matter.

It is also wrong to say global warming theory is unanimous and uncontested. There is much debate, with countless prominent scientists and organizations debunking the flawed science and data manipulation that led to Al Gore's push. It is well publicized and documented in all media. There is equally credible science showing man-made greenhouse gases are not dictating climate change. Look it up.

Thank you for your background and perspective. I am a college graduate in a science field with 25 years of experience. Your goals of a clean environment, vibrant economy and secure country are shared by all of us. My experience and education, not politcal affiliation, tell me that CAP and Trade must suffer clear defeat, and the EPA be disempowered to further regulate, for us to really achieve it.

To concernedtoo: I am not at all environmental extremist, I'm certainly no celebrity, and I'm not following any scripts... I just seriously doubt the validity of Mr. Stanton's argument. I won't throw back labels at you, but honestly, you can't try to claim that CO2 isn't a greenhouse gas and call it science.

I'm going to assume that Al Gore is the celebrity you're referring to, to which I say correct, Al Gore isn't a scientist. If climate change theory was based entirely on his opinion I wouldn't give it any weight either. But this isn't a debate of Al Gore vs. the science community, or even a split debate between scientists. The essential tenets of global climate change science are uncontested by every scientific body of national or international standing. They may disagree on the details, but not on the importance of reducing our carbon emissions.

I am a recent graduate, and would really like to be able to enjoy our environment, a vibrant economy, and a secure country as I grow older and have kids ... maybe that's too much to hope for when we can't seem to get over hyperpartisan politics, but maybe our Senators will surprise me and pass this bill -- its oponents may be particularly loud, but the majority of Americans support it.

Cap and Trade will have severe consequences for Americans. It will cut thousands of jobs, raise the cost of electricity for everyone and will not create enough jobs to re-employ everyone who lost their job. Go to www.dontcapandtradeourjobswv.com to sign the petition and to send a message to your senator that we are against cap and trade!

Showalter Micropower on Pickens Plan could make a large dent in the C02 made at the plant, and poss. make it carbon zero with off-sets in a few years. Look him up ! Oh yes he is a WV boy !

Crippling our economy for the sake of shakey psedo-science is suicide on a national scale. "Global warming" is far from settled science and mankinds contribution to it is even less understood. Look at it this way, 1000 years ago the Vikings settled Greenland and FARMED there. Today it is a solid chunk of ice. Even if it is warming again today it is only returning to levels which were experienced in the pre-industrial age. Where were the viking's SUV's and refineries? The earth is a dynamic system. Climate has never, ever been static. It changes dramatically from decade to decade, even more so over centuries. Humanity has kept reliable climate data for only around 100 years. Anything further back than that is based on data that is open to 1000 different interpritations. We, as a species, have a very short memory. Cap & Trade will make us pay a dear price for being so short sighted.

Even these cost projections may underestimate the true costs, because they assume no unpleasant surprises. But the world has already witnessed many unpleasant surprises with Europe's ongoing efforts to impose a cap and trade program under the Kyoto Protocol, the international climate treaty to reduce greenhouse gas emissions. In fact, European efforts have racked up significant costs while failing to reduce emissions. Nearly every European country participating has higher emissions today than when the treaty was first signed in the late 90's. Also, despite ongoing criticism of the United States from Kyoto parties for failing to ratify the treaty, emissions in many of these nations are actually rising faster than in the United States. So yes, Mr Stanton does make a valid point.

With due respect, Speltmelk and Fierisq are reading from the same environmental talking points, probably following the same scripts on how to respond to criticism of climate change.

"Only 1.3% of facilities are affected.." They omit how many jobs are affected. And it is more than just those. The National Association of Manufacturers, which represents all sizes and types of manufacturing, is unaminously opposed to cap & trade legislation. Their study says even with new green jobs, 500,000 jobs net are lost each year due to this bill. Every single oil refinery in the US will be affected. Every coal power plant will be affected. Every person who uses gasoline, diesel and/or electricity will be affected. Anything transported by truck, train, air, etc. will be affected. It's the same old "tax a few, the villains, for the benefit of many..." Those aren't villains. They are good companies providing good products and services plus good jobs and benefits to good people. Penalize them and they take their business elsewhere - another country.

"We can meet the challenge if we try..." You can believe all you want but if you jump off a cliff without protection you're dead. You can't change the facts - these industries continue to improve efficiency and capability, and have already reduced emissions tremendously, which keeps fossil fuels more economical. More subsidies for renewables artifically inflate costs that businesses and consumers have to pay, and put us at a disadvantage to global competition who do not pay. When the technology and price are there, they will come. Wind and solar don't work in the central US because there isn't enough wind or sunshine. I think only God and change that.

"Greenhouse gas emissions...pollution...must be reduced ... cleaner technology..." That is a matter of opinion still, regardless of what EPA says. Carbon is a basic building block in life. CO2 is a fundamental compound in life. If you're above ground and breathing, you emit CO2 in your breath. Animals exhale it, plants need it to grow. Studies have proven higher CO2 in the atmosphere increases plant growth rate and yield while reducing water requirements, which can even result in a real greening of the earth. It is a disservice to call CO2 a pollutant.

"Global warming is a threat..." There is credible science on both sides. Evidence is inconclusive. Celebrity and environmental extremists have caused an emotional response, not intellectual. CO2 levels cannot be proven to have increased ambient temperature. Depending on time span, 10 years, 100 years, 1000 years, data can show temperature increasing or decreasing. Most show we are below average. Man-made greenhouse gas is less than 1% of all produced, most of it being natural water vapor which you also exhale.

Now that the masses are getting educated, the extremists will have to look for new talking points. But real intelligence, truth and science will be able to dispell those too.

Something that you failed to mention Mr. Stanton, is that the American Clean Energy and Security Act (ACES), would require compliance from only a small portion of businesses concentrated in the manufacturing center and that only very large emitters would fall under any new regulation. The ACES bill would create a nationwide cap on greenhouse gas emissions that would only apply to firms that emit more than 25,000 metric tons per year of carbon dioxide or its equivalent in other greenhouse gases.

The Nicholas Institute brief, "Size Thresholds for Greenhouse Gas Regulation: Who Would Be Affected by a 25,000-Ton CO2 Emissions Rule," looks at several sectors of the economy and finds that large-scale businesses are disproportionately responsible for U.S. emissions. In manufacturing, only 1.3 percent of facilities emit cross the 25,000 ton threshold - but are responsible for 82.5 percent of the sector's emissions.

The analysis finds that 4,724 of America's more than 350,000 manufacturing facilities would be covered by a 25,000-ton emission threshold. Only very large emitters would fall under any new regulation and since large-scale polluters are responsible for a supermajority of U.S. greenhouse gas emissions, “we can get enormous environmental benefits while regulating a small percentage of firms" (David Cooley, associate in policy and research at the Nicholas Institute).

I think it should also be noted that for the fiscal years 2002-2008, the government gave 2.5 times more subsidies to fossil fuels than to renewables as reported the Environmental Law Institute. Fossil fuels received approximately $72 billion over the seven-year period, while subsidies for renewable fuels totaled only $29 billion. Not to mention that “most of the largest subsidies to fossil fuels were written into the U.S. Tax Code as permanent provisions" while "many subsidies for renewables are time-limited initiatives implemented through energy bills, with expiration dates that limit their usefulness to the renewables industry." Not only that, but when fossil fuels are subsidized, it makes it even harder for renewable energy to compete. The ACES bill will level this playing field and give other industries a fair chance to compete and grow. It is not the taxpayers job to protect your monopoly Mr. Stanton, no matter how much you paid in taxes.

The clean energy bill is not about closing down ANY business. Just like a speed limit is designed to keep you driving safely rather than lock you out of your car, a carbon cap is designed to make energy production safer. It will open the door to new forms of clean energy, while offering incentives to make our current means of energy production cleaner. More than that, it will put our economy in the HOV lane- with it's help we'll be able to speed up our green economy, create new jobs and lessen our dependency on foreign oil.

To be honest, I'm a bit confused by this article. Mr. Stanton claims that starting in 2012, Ergon-WV will have to buy $35 million for CO2 allowances. However, HR2454 only applies to firms that emit more than 25,000 metric tons per year of CO2 or its equivalent in other greenhouse gases -- according to a study by Duke U, only 1.3% of U.S. manufacturing facilities qualify!! These facilities are also responsible for over 85% of US manufacturing emissions... so they emit a ton (or rather, lots of tons).

Either Mr. Stanton is vastly overstating his costs, or his company emits a whole lot more pollution than he's letting on.

A cap on carbon will allow our country to cut emissions the most cost-efficient way possible, and will encourage our companies to innovate cleaner and cheaper technologies to meet the requirements. Sure, it may be difficult at first - but the U.S. has never been one step down from a challenge.

This bill will also have a devastating effect on the coal industry. The people in this country better wise up and see what the left wing radicals in Washington and President Hussein are doing to this country before it's too late.