INSIDE VIEW: Industry challenges, opportunities for 2014

01 January 2014 17:00  [Source: ICIS news]

Charles DrevnaEditor’s note: This article is an opinion piece, and the views expressed are those of the author and do not represent those of ICIS.

By Charles Drevna, President,
American Fuel & Petrochemical Manufacturers

Forgive me for using what has become an overused saying, but as I look ahead to 2014, it seems like déjà vu all over again.

Throughout 2013, a primary focus of my organisation was the badly flawed and outdated Renewable Fuel Standard (RFS). Much time and energy was spent trying to find a palatable solution to this bad law, and I recently was asked if it would again be the main focus of my organisation in the year ahead.

The answer is yes and no.

Yes, the RFS will remain a top priority. I am pleased to report that progress was made late in 2013 when the Environmental Protection Agency (EPA) recognised the potential adverse effects on consumers of increasing the ethanol volume in the fuel supply and reduced the 2014 mandatory volumes. Even with the cut, greater reductions in the biofuel mandate are necessary if consumers are to avoid all the detrimental impacts of the statute. We will continue to look to Congress to repeal this broken law or find another solution that considers the impact of this pernicious policy on consumers, today and into the future.

Also, the answer to that question is no, the RFS will not be the main focus of the American Fuel & Petrochemical Manufacturers (AFPM), but just one of many important challenges we will face in 2014. Looking ahead, I see a growing number of climate regulations that will impact the industry. Even more concerning is that many of these regulations conflict with one another.

Research has shown that the RFS increases ozone and greenhouse gas (GHG) emissions and is in conflict with Corporate Average Fuel Economy (CAFÉ) standards, as well as other Clean Air Act regulations; while Tier III regulations result in greater greenhouse gases, thus contradicting  the EPA’s GHG regulations. These conflicts could leave many facilities across the country questioning how they will meet some requirements without violating others.

Another challenge may come with President Barack Obama administration’s recent executive order (EO) that adjusted the metrics by which all federal agencies assess the costs of carbon emissions, known as the social cost of carbon (SCC) calculation. The recent EO is comprised of subjective metrics that were developed to try and quantify the alleged societal benefits of reducing only GHG emissions.

Unfortunately, the SCC scheme will only add additional burdens on the consumer because it inflates the potential benefits of regulatory actions in a manner that hides the true economic and societal costs of new rules. Applying these calculations to assess the costs and benefits of regulations could erroneously be used to justify discontinuing the use of traditional, affordable energy sources through overly stringent regulations in future rulemakings.

In the year ahead, we will work to minimise the impact on our members of tax reform. Throughout much of last year reform was considered, but as often happens in Washington DC, time ran out without Congress taking action. Interest remains in Congress for some type of tax reform, and it is expected to continue to present ideas and options throughout the year on reform. The AFPM agrees with an overall approach that simplifies the tax code and helps US businesses become more competitive globally. We will, however, work to oppose any reform that seeks to benefit some businesses and industries while intentionally harming others.

Along with the many challenges that lie ahead, there are also many opportunities. Today the US is on the cusp of a new manufacturing era. The recently discovered vast reserves of US energy resources have revived the petrochemical industry and promise to provide a bright and viable future. 

In recent years, private sector innovation and investments to develop new oil and gas extraction techniques, such as horizontal drilling and hydraulic fracturing, have led to a revolution in gas and oil recovery from shale, and with it has created thousands of jobs that are growing the US economy. 

This exciting expansion can only continue, however, if the federal government stays out of the way and allows the market to work. Hydraulic fracturing has been safely conducted throughout the US for decades. Placing federal regulations on hydraulic fracturing will only slow down energy production and job growth in states that currently have their own regulations.

Already, this far-reaching manufacturing renaissance, brought on by the recent increase in domestic oil and natural gas production, has brought about more than $100bn in planned manufacturing infrastructure development throughout the US during the next decade. This development will bring with it even more jobs in the near-term as construction projects are planned, and even more in the future once facilities are built and up and running.

But, in order to achieve this growth, a vibrant workforce is needed if the dream of bringing manufacturing back to the US is to be sustainable. Just a few weeks ago, the AFPM helped launch the American Shale & Manufacturing Partnership (ASMP). The partnership is a diverse group of organisations and industries united in a singular goal of fostering an American manufacturing renaissance. The partnership will focus on workforce education and job creation, as well as the creation of policies and regulations that foster the success of the manufacturing renaissance. 

Without question, the next 12 months will present numerous challenges for the AFPM as the Obama administration looks to implement new industry regulations before its clock runs out. We are fortunate, however, that our membership understands that every contentious issue must be met with a persistent determination so that legislation and regulations are based on reality which is fundamentally this – the wind can die, the sun can set, the corn can wither, but fossil fuels can and will continue to keep America energised. 

Author: ICIS staff

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