API: GHG Emissions Reductions Don’t Need Further Gov’t Intervention

Source: By Rachel Gantz, OPIS  • Posted: Friday, December 4, 2015

Paris — During the first few days of the international climate change conference here, there has been lots of talk about ways to reduce greenhouse gas emissions and meet collective reduction targets. Environmentalists and non- governmental organizations are well represented among the 40,000 attendees, but one group that doesn’t appear to have a large presence is the oil sector. On the sidelines of the talks here today, OPIS talked with two officials from the American Petroleum Institute (API), Director of Media Relations Eric Wohlschlegel and Director of Regulatory and Scientific Affairs Howard Feldman, to get their perspective on the conference, its goals and the overall effort to reduce emissions.

OPIS: What propelled API to attend climate change conference?
Feldman: We have not been to previous ones. We have always known the issue was important and we wanted to make sure our views on this issue were out there in the discourse.

OPIS: What are API’s views?
Feldman: We are promoting what we call the U.S. model, which has been very successful in the U.S. Our emissions have declined primarily through the increased use of natural gas. We have seen CO2 emissions drop to near 20-year lows from power plants. Methane emissions are declining at the same time as production is increasing. It’s a good model. It is not done through government mandates, but on the success of industry left to its own resources.

OPIS: What does the U.S model mean?
Feldman: It is the increased use of natural gas in power plants and in industry.

Wohlschlegel: Investments are going into hydraulic fracturing. It made us the number one producer of natural gas in the world. Through those processes, we are capturing more and more methane, which is a byproduct of that process. And we are leading the world in reducing carbon emissions.

Feldman: According to EIA, the reduction in carbon emissions is largely driven by power plants switching to natural gas. They are switching because of the marketplace. Gas is affordable and that is due to increased production.
Plentiful natural gas has allowed them and compelled them to switch fuels.

Wohlschlegel: The power plant rule has a baseline target for 2025. With the U.S.
model, we have identified states that if they continue to move in that direction, the U.S., through the free market, will achieve greater emissions reductions than in EPA’s own power plant rule.

Feldman: The final ozone rule came out Oct. 1, lowering the standard from 75 ppm to 70 ppm. It will compel additional emissions reductions of VOCs and NOX.

OPIS: Did API meet with EPA when it was formulating the ozone rule?
Feldman: Yes. Our position was that there was no need to change the standard.
The science did not compel them to change the standard. The cost of changing the standard is severe, both on states and local communities. It has the potentially to be the costliest regulation ever.

OPIS: What are your impressions so far at COP21? Are you hearing a lot of anti- oil/natural gas sentiment?
Feldman: No.

Wohlschlegel: There are people here that support natural gas, hydrogen and nuclear fuel and there are some extreme portions of the environmental community that don’t. But if living in reality, and talking about the revenue a government gets, the ability to heat our homes and meet the demands of American consumers, natural gas is a huge baseline energy success. It is reliable, easy to transport and plentiful. We’re the number one producer in the world. We’ve got loads of it.

OPIS: What impact do you think the oil and natural gas sector can or already has made to reduce emissions?
Feldman: We’ve done a lot, through increased availability of natural gas that have allowed emissions to be reduced. We also have a process now called green completions, which was developed by industry and afterwards EPA made it a requirement. That technology reduces emissions 80%-90%, which is quite significant progress on helping to reduce emissions.

Wohlschlegel: Whether it’s the COP21 conference, or the methane rule or the ozone rule, improvements are already happening. Thank you government for coming to the party, but the party’s over. We’re doing it. We’re moving in the right direction. … Why do they keep layering on rule after rule? The government is supposed to be working for the people, for the economy, for energy, and it looks like it’s creating more headwinds that at the end of the day will cost consumers and raise energy prices. Who does that hurt? The poor. That’s what we’re talking about here. We’re talking about the world where we have plentiful energy to help the most needy in our communities and that’s what the government should be focused on.

OPIS: How would you like the government to help the poor in regard to energy prices?
Wohlschlegel: Let the markets work. Prices are already coming down because of increased production of natural gas. The average household saves over $1,000/year. Our encouragement to the government is to not impede those opportunities and let industry continue to produce fuels that are available.

OPIS: API recently merged with America’s Natural Gas Alliance as a way to increase its focus on natural gas. Can you tell me how long the merger was in the making?
Feldman: What we can share with you is the fact that the merger is in response to market forces. There are challenges in the low-cost environment for businesses and there were synergies between the two organizations.

Wohlschlagel: From operations to memberships, generally there has been a major shift to making industry more efficient … and this is a product and result of that.

OPIS: Will there be staff redundancies?
Feldman: The merger is getting addressed. Whatever organization it will be going forward, it will all be folded into API, but is not a complete one-plus-one trade off. We want to capture some of the cost savings.

OPIS: Will there be layoffs?
Wohlschlagel: There’s going to certainly be some staff changes.

OPIS: Switching gears to the RFS, what are API’s impressions and does the group plan to file another litigation challenge to the rule?
Feldman:  We are reviewing the rule and, when we get done, will consider litigation options. We have 60 days from when it is published in the Federal Register to file. We were glad to see EPA exercised its waiver authority that Congress has given it. However, we were disappointed to see some of the requirements for 2014 and 2015 go up when that’s essentially history due to EPA’s inability to get the rule proposed on time.

It is bizarre that we live in a world where someone tells you how much fuel you were supposed to sell last year this year. That is a bizarre thing EPA has done.
Going forward, what EPA is proposing is to exceed the blend wall for the first time and mandate fuels that cars can’t use. That is something API does not support.

OPIS: What do you think are the chances for RFS reform or repeal?
Feldman: It’s another reason and demonstration that we need to have some action taken in Congress to fix the stature.

OPIS: Will it happen this year?
Feldman: We will have to see on that. The number of legislative days remaining is small, as is the legislative vehicles that will actually get passed. This will be something we have to watch.

OPIS: Do you believe the COP21 agreement should include binding targets?
Feldman: We believe in the U.S. model, which has been successful by letting industry work and lowering emissions. The U.S. government should continue to make progress. We don’t need additional regulatory mandates to do that.

Wohlschlagel: Missing from the debate is the fact that the oil and natural gas sector spends more than any other industry on zero and low emitting technologies, such as algae fuels and more efficient engines, and almost as much as the federal government. The U.S. is leading the world in reducing emissions.
People aren’t getting that. Industry invests almost as much as the federal government. The main thing being discussed at COP21 is the amount of money that countries are committing to spending on lowering emissions. The U.S. private sector is already doing it.

Feldman: There is a gap between where we are right now and the U.S. targets that have been discussed. There’s been no disclosure on how President Obama thinks we would achieve those targets. That’s quite significant and people want to know.