Monday, September 21, 2009

The Politics of Energy #22 - Live by the Sword...

Texans say a climate-change bill in Congress would take too big a toll on their state

(Editor's Note: Interesting how the climate change bill hits the biggest Red state the hardest. If  the bill were about results it would measure carbon emissions according to production efficiencies. But the bill is about huge new taxes, which makes it a political document aimed at parties with the least clout under a Democratic congress.)


A bill in Congress to curb global warming has a lot of Texans boiling.

The bill proposes to make some companies pay for the carbon dioxide and other greenhouse gases they emit, gases that scientists believe are contributing to rising temperatures. And that puts the Lone Star State, which produces more emissions than any other state and even some big industrialized countries like Canada, squarely in the cross-hairs.

If the climate-change bill becomes law, it will have a severe impact on the Texas economy, local officials say. A study commissioned by the state comptroller says 135,000 to 277,000 jobs could be lost in 2012, the year the legislation would take effect. Roughly 312,000 people work in the oil and gas industries in the state, home to a quarter of the nation's refining capacity and to oil giants Exxon Mobil Corp. and ConocoPhillips.

'A Monster'

"This is a monster for the state, given the fact that so much of our revenue comes from [the energy] sector," says Comptroller Susan Combs in an interview. "It's going to hit us disproportionately."

Texas Gov. Rick Perry, a Republican, has said he thinks the bill would "devastate" some of the industries that have helped his state weather the recession better than other regions. "To throttle that one bright spot is a little bit puzzling," Mr. Perry said at a June roundtable held in Austin to discuss possible effects of the legislation. Also, a national campaign against the bill, sponsored by the oil industry and other opponents, made its debut in Houston in August.

Battle lines in the national debate over the bill highlight a growing split between mostly Republican states heavily invested in oil and gas production and Democratic-leaning coastal states that have invested in alternative sources of energy and rely on service industries. Joining Texas are the Oklahoma Legislature, which in May issued a statement against the bill, and former Alaska Gov. Sarah Palin, who lambasted the proposal in a Washington Post op-ed column, calling it "an enormous threat."

The bill, sponsored by U.S. Reps. Edward Markey (D., Mass.) and Henry Waxman (D., Calif.), won narrow approval in the House in June, but it is expected to face more heated debate in the Senate in coming months. Indeed, signs point to an uphill fight for the Obama administration as it tries to steer the country toward more expensive but cleaner sources of energy.

"Cheap energy has been a cornerstone of American policy," says Robert Stein, a political-science professor at Rice University in Houston.

Hearts of Texas

And perhaps nowhere are the stakes as high as in Texas. A study commissioned by the American Petroleum Institute, a Washington-based industry group that opposes the bill, projects that the measure would result in a loss of 1.95 million jobs by 2020—about 14% of which would be in Texas. In the same year, the study says, the legislation would cost the state's average household about $1,600 in lost purchasing power—58% greater than the predicted national average.

Texas emits about three times as much carbon dioxide per dollar of economic output as California or New York, the study says. Texas also far surpasses California, a more populous state with a bigger economy, in total emissions, due to its penchant for big trucks, its hot, sprawling cities, and its slate of energy-intensive industries like aluminum and petrochemicals.

Another reason Texas may take a bigger hit than other states: Refiners as a group would get less of a break than coal-powered generation facilities under the terms of the bill. The legislation proposes to give each polluter a certain allowance of emissions for which they don't initially have to pay. Companies would then have to buy permits for emissions that exceed their allowance.

The bill would require refiners to account not only for the carbon they emit when processing fuel, but also for the tailpipe emissions generated by the gasoline and diesel they sell. Even so, they would receive only 2.25% of allowances allocated under the bill, even though they account for 44% of total CO2 emissions subject to the bill, while coal-based electricity producers' allowances would be much closer to their actual emissions, says Bill Durbin, a Houston-based consultant with Wood Mackenzie, a global energy consultancy. "That will be a significant upfront cost for refiners," he says.

The Energy Information Administration, part of the U.S. Department of Energy, predicts the bill could add between 35 cents and $1.28 to the price of a gallon of gasoline by 2030—a premium that could erode fuel demand, and the health of a sector that represents about 15% of Texas' gross state product.

Supporters, Too

But not all of Texas is opposed to carbon caps. Robert A. Webb, president of the Austin-based Texas Renewable Energy Industries Association, argues that the state's economy can become stronger as a result of the climate bill. Not only does Texas have a lot of renewable-energy potential, but much of its oil-industry labor can be redirected toward making carbon-emitting facilities more efficient, Mr. Webb says.

"While we will have a temporary disruption, Texas is strong," he says. "Moreover, a lot of Texas industries can benefit." Mr. Webb is general counsel for Biofuels Power Corp., a power provider based in The Woodlands, Texas, that generates electricity from biofuels.

Some state Democratic proponents of the climate bill also say it could help nudge the state toward a more diversified, environmentally friendly economy. Indeed, Texas leads the U.S. not only in oil refining and natural-gas production, but also in wind-power capacity.

"As we move into renewables, Texas stands to gain more than other states," says U.S. Rep. Charles Gonzalez (D., Texas), who sits on the House committee that moved the initial version of the bill.

But Ms. Combs, the state comptroller, says the wind industry has created only 500 to 800 permanent jobs in the state, a small fraction of the jobs that she believes will be lost. "I don't know where the new jobs are going to come from," Ms. Combs says. "They're not going to come from wind." Landing a green job in Texas, she adds, could be akin to finding a "unicorn—a sort of mythical beast."..

Mr. González is the bureau chief for Dow Jones Newswires in Houston. He can be reached at

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