BIC Magazine recently spoke to AFPM President Chet Thompson to discuss refining and petrochemical industry hot topics including crude oil exports, the Jones Act, and industry forecasts and regulations.
BIC: What do you think will be some immediate effects of lifting the crude export ban?
THOMPSON: The current global oil glut has certainly mitigated any immediate effect. We think at current crude prices, the most likely place for U.S. crude is here in the United States. U.S. refiners have the capacity to handle increased U.S. production, and so in the short term we don’t expect to see much of an impact on our members. But lifting the crude oil ban has not created a so-called “free market.” That won’t happen in any meaningful way until the Renewable Fuel Standard (RFS) is repealed and the Jones Act is reformed. The lifting has placed a greater spotlight on the ill effects of the Jones Act — including it’s now cheaper to export U.S. crude to our foreign refining competitors than it is to ship crude from the Gulf Coast to the East Coast. In essence, the Jones Act is serving as a subsidy to foreign refining, and the RFS is serving as a tax on domestic refining.With the Jones Act, you’re talking about legislation enacted post-World War I in an effort to ensure our national defense and secure our maritime fleet. As it relates to crude oil and petroleum products, the Jones Act needs to be repealed. It makes no sense to maintain a policy that makes it cheaper to export our oil than to use it domestically, and that is exactly what the Jones Act does. This is bad for consumers and U.S. manufacturers.
BIC: Will North American refining remain strong?
different types of crude oil. Going forward, I think you will see our industry reap the gains from these investments through improved capability, both in using domestic crude oil and in meeting changing U.S. product demand, while maintaining a competitive advantage in many international markets. Demand for our products is projected to remain strong.
BIC: What would the impact be to refiners if higher-ethanol fuels are required?
THOMPSON: As has been the case since its inception, the RFS is bad for consumers and the environment. It distorts the market and forces refiners to follow a government-authorized playbook that runs counter to what consumers want and what many cars and engines can handle.If EPA mandates more ethanol than current infrastructure and other constraints (e.g., engine warranties, consumer demand) can safely use, then many refineries would be forced either to manufacture less fuel or export more. Neither of those options is in the best interest of U.S. consumers or the economy.
BIC: What will be the most talked about regulations for 2016?
THOMPSON: Much of the discussion this year likely will not be about new regulatory efforts but rather legal challenges to major regulations promulgated last year, including EPA’s RFS volume requirements for 2014-2016, the Refinery Sector Rule and, of course, the Clean Power Plan. The outcome of each of these cases has major implications for the fuels and petrochemical industries. AFPM is involved in all of these cases. And, of course, 2016 is an election year, so that will dominate a lot of airtime as well. For more information, visit www.afpm.org or call (202) 457-0480.
The 2016 AFPM Reliability & Maintenance Conference and Exhibition will be held May 24-27 at the Henry B. Gonzalez Convention Center in San Antonio. The event, themed “Improving Reliability, Learning From Case Studies,” is about sharing improvements and learning from others’ experiences. In each workshop, presenters will describe their reliability and maintenance challenges, how they selected a solution, and the ups and downs of implementing that solution. This will be done through a series of operating company case studies. The program has almost 40 workshops.
For more information, visit www.afpm.org/Conferences or call (202) 457-0480.