The common thread through all three complex issues, according to the presenters: Transparency is crucial to a fair industry outcome.
Climate Change
The House narrowly approved its version of a climate bill, H.R. 2454, in June, while in September, Senators Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) unveiled a draft of their bill. Both bills establish a cap-and-trade system to regulate carbon-dioxide emissions. The Senate bill, however, sets a more aggressive goala 20% cut in emissions by 2020and is still undergoing review and fine-tuning in committee.
The House bill provides an allotment of free emissions permits to the biggest carbon-dioxide (CO2) polluters; however, presenter Brandon Wright, manager of regulatory affairs and communications at PMAA, noted that while the petroleum industry emits 44% of the country's total CO2 volume, it would receive only 2% of these emission allowances. An analysis by the Energy Information Administration (EIA), meanwhile, found that the House bill would increase gasoline prices by $1.24 per gallon and diesel by $1.73 a gallon, potentially pushing both above the $5 a gallon mark.
"It would pretty much, in the way it's written now, have a profound effect on how we live our lives," said fellow presenter Brian Milne, energy editor with Telvent DTN. "True, we all want a cleaner environment, and that comes with some cost. However, what the House bill and Senate proposal do is they would create a significant tax on all forms of energy."
He predicted that demand might retreat as consumersespecially lower-income consumersare pressured to conserve.
On the same day that Boxer and Kerry unveiled their bill, the Environmental Protection Agency (EPA) announced a proposed rule that would require those facilities emitting 25,000 tons of CO2 a year to install the "best available technology" to cut emissions.
"They're trying to use the business community to force the hand of Congress," said Wright, "letting the business community know that they're willing to move on regulating carbon emissions and really take a sledgehammer to an issue that's really more complicated than that."
PMAA and the CEO of Exxon Mobil Corp., Rex Tillerson, have endorsed a carbon tax. That being said, "Certainly a carbon tax would be more transparent," Wright acknowledged, "but I don't think it will get too many supporters on Capitol Hill."
Securities Regulation
With the passage of the 2008 Farm Bill, Congress placed commodities under the regulation of the U.S. Commodity Futures Trading Commission (CFTC), a power not previously granted. The commission recently began flexing its authority over exempt commercial markets. In addition, the CFTC is now providing reports that will cover the past three years, to reveal more about who is trading; and the CFTC head is considering hard position limits on oil futures and commanding a review of hedge exemptions for non-commercial entities.
Presenter Sherri Cabrera, PMAA vice president, noted that PMAA was the first national oil industry association to endorse Gary Gensler as new chairman of the CFTC, and described him as "a terrific advocate of reform" who is "aggressively pursuing every authority he has to strengthen transparency."
In Congress, the House has passed bills to strengthen the oversight powers of the CFTC's inspector general and other regulatory agencies. It also passed a bill out of committee that would impose position limits on non-commercial traders, distinguish hedgers from speculators and close various loopholes. But the effort to reform the commodities futures market is not over, Cabrera argued. "The main thing is Congress needs to give the CFTC the statutory authority it needs to apply aggregate position limits and enforce those."
Regardless of futures-market regulation, volatility will remain, Milne said. "Butwe're looking at better transparency, and better transparency should level the playing field for all involved, not just the large players that use futures but also small players who hedge to protect positions when they're buying and selling fuel futures."
Credit-Card Interchange
Perhaps some of the most positive legislative movement PMAA has seen is in credit-card interchange reform. The signing of the Credit Cardholders' Bill of Rights in May included a study of interchange fees. The Credit Card Interchange Fees Act and its companion bill in the Senate are wending their way through Congress. Tomorrow, the House Financial Services Committee will hold a hearing on the issue. Petroleum marketers can keep the momentum going by contacting their congressperson.
"We would like to see an opportunity for retailers to negotiate the fee down," said Wright. "I think you would find more retailers would accept credit cards if they could receive more favorable treatment from the credit-card companies."
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