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ConocoPhillips Exec: Climate Change 'Heavy Lift' in Congress This Year

The odds aren't in favor of Congress passing broad-based climate change legislation and forwarding it to President Obama this year, an official with ConocoPhillips said Thursday.

"I think it will be a heavy lift to have a comprehensive climate change bill come out of conference this year and head to the president's desk," said Red Cavaney, senior vice president of government and public affairs, at the Natural Gas Roundtable in Washington, DC. "I think that we're far enough along [to realize] that it's going to take a while to put a comprehensive bill out."

But "it's not inconceivable that maybe a research investment-only kind of bill, or some variation that's relatively simplistic, could possibly happen" this year, Cavaney told energy executives and former regulators.

Climate change legislation "will come about in a longer timetable," when Capitol Hill lawmakers can put aside their partisan and regional differences to achieve "something that can get a large majority," he said.

If there's a "backlash" by the public to the climate change legislation and "members of Congress are forced to retrench, my guess is it's going to be five to 10 years at least before you could come back and try and get something done. And that doesn't help anybody. So I think it's that pressure that's going to help all of us around the table," Cavaney noted.

"I think -- and [Rep.] John Dingell has mentioned this before -- if you want to have a good model of how to put together a good bill that deals with climate change...the concept of how they moved the Clean Air Act [CAA] is a perfect example." The CAA had its share of detractors, but in the end "it was supported by Republicans and Democrats. It was tough, but it did the job."

However "we're not there yet," Cavaney said. "Disappointingly yesterday [Wednesday on Capitol Hill] there was still too much of a little bit of rough edges of partisan bickering going on" with respect to the House discussion draft on capping greenhouse gas (GHG) emissions and trading emissions credits.

The hearings being held by the House Energy and Commerce Committee are "the opening round of the discussion in earnest about climate change legislation," Cavaney said (see Daily GPI, April 23). He said Sen. Barbara Boxer's (D-CA) climate change bill last year was a "false start."

Congress will have to take it's time with climate change policy. It "isn't going to be rammed down anybody's throat," he said. And "at the end of the day my guess is there'll be enough people crossing the aisle on both sides [in support of a bill]. If they're going go pass something comprehensive, it will take time but they will get something."

And "everybody's going to get pinched on this...Whether you want to call something a tax or a cap or anything else, the notion that you're going to be able to move off carbon only works if people understand there's a price to pay," Cavaney said, adding that climate change mitigation will take a toll on energy prices.

"So that [the] increase isn't highly volatile and doesn't spring...off a high dive board the minute you enact legislation, you need a lot of other measures and a lot of other provisions that interact with one another to help, particularly in the early stages, temper [volatility]," Cavaney noted.

For utility and industrial companies, there could be a "dash for gas...where all of a sudden you get this incredible run because you can save yourself from having to buy a lot of emission credits by converting whatever is in coal or some other form of hydrocarbon into natural gas."

Now is not a good time for the hydrocarbon industry, said Cavaney, citing Obama administration policies on oil and gas drilling and the potential regulation of hydraulic fracturing under the Safe Drinking Water Act. "I think that we're in for a tough time, those of us in the hydrocarbon world. We've been there before. We have our market challenges. We have our regulatory challenges. We have our tax challenges, and now we just added a new one [climate change].

"I think at the end of the day with passage of time people will conclude that all the new forms of energy will have their place ultimately, but [it's] not going to happen overnight. I hope we have the good sense to allow hydrocarbons to become cleaner and cleaner and more environmentally friendly over time and then eventually, decades down the road, let the consumer make their choice."

On Capitol Hill Thursday an official with the American Gas Association (AGA) called on a House subcommittee to exempt residential and commercial natural gas customers from a cap-and-trade system for GHG emissions in favor of "programmatic" measures, such as appliance standards, building efficiency codes and other energy efficiency initiatives.

"We believe and history proves that programmatic measures uniformly applied can accomplish what we want without the undue costs and complexities of a cap-and-trade system," said John Somerhalder, vice chair of AGA and CEO of AGL Resources, during a House Energy and Commerce subcommittee hearing on a draft discussion of the American Clean Energy and Security Act of 2009.

"We maintain that a national programmatic focus effort rather than a cap-and-trade effort for these customers is the best way to ensure equity while not subjecting customers to unpredictable allowance costs. We do not want to see our customer competing with electric generators and large industrials for the allowances necessary to heat their home and cook their food," he said.

In the alternative, "AGA supports excluding residential and commercial sectors from the scope of the cap-and-trade system until 2016, as proposed in this [House] discussion draft bill," Somerhalder said (see Daily GPI, April 2). However, AGA believes that most allowances required for residential and commercial sectors should be allocated rather than auctioned. He said allocating allowances is the best way to ensure that the price impact on these customers will be minimal.

Somerhalder also expressed concern with the proposed energy efficiency resource standard for both electric utilities and natural gas utilities. "While the end result is a laudable one, the lack of clarity in the language...causes concern. First, the legislation could have the unintended consequence of limiting carbon-driven fuel switching and could even increase the nation's dependence on foreign oil by preventing conversion to high-efficiency gas applications," and secondly could raise the cost of fuel to new and existing customers, he said.

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