The CEO of refining giant Valero Energy Corp. warned today that the Senate climate legislation would give a competitive advantage to foreign refiners and cost U.S. jobs.

Addressing the Senate Environment and Public Works Committee, Valero's Bill Klesse alleged that the Senate bill and its House counterpart would create large new costs that would drive domestic gasoline and diesel production offshore, cause job loss, and reduce U.S. energy security. He spoke on behalf of the National Petrochemical and Refiners Association, the industry's main trade group.

"You must remember we are a global business," Klesse said. "You will simply be driving the carbon dioxide emissions overseas."

Klesse said Texas-based Valero -- a large independent refiner with 16 refineries in the United States, Canada and the Caribbean -- would face "staggering" costs even at a carbon price of $20 per ton, he said.

For instance, he said the company's Corpus Christi, Texas, plant would face costs of up to $92 million per year. The industry as a whole, if held responsible for its process emissions and consumer emissions of its products, would face more than $67 billion in annual costs, he said.

But EPW Chairwoman Barbara Boxer (D-Calif.), a co-sponsor of the bill (S. 1733 (pdf)), attacked Klesse's conclusion that the bill would harm U.S. security. "The opposite is true," Boxer said. She cited multiple analyses that conclude global climate change creates national security risks.

The bill would set up a cap-and-trade system under which facilities that produce carbon dioxide emissions must obtain permits for their emissions. Boxer said the bill includes provisions to cushion the effects on refiners. The bill provides 2.25 percent of the free emissions allowances to the refining sector.

"We do have a lot of allowances going in that direction," Boxer said. But the industry has called this amount too low to prevent major new costs that will prompt job losses in the sector and raise consumer prices.

Klesse told reporters after his committee appearance that refiners should receive a far larger amount of the bill's free emissions allocations.

The committee also heard from several of the bill's supporters who urged passage of a cap-and-trade plan to curb U.S. emissions and urged several additions to the bill.

Dan Reicher, Google Inc.'s director of climate change and energy initiatives, said legislation that puts a price on carbon emissions is vital but not sufficient. His recommendations include $15 billion per year in federal energy research and development spending.

Reicher also said that lawmakers should boost the size of proposed renewable energy and energy efficiency mandates. A separate bill approved by the Senate Energy and Natural Resources Committee creates a 15 percent renewable electricity standard by 2021 but allows about a fourth of the requirement to be met with efficiency measures.

Google's climate director also called for higher renewable energy and efficiency targets, citing a Union of Concerned Scientists estimate that the Senate energy committee target would not prompt new renewable generation beyond what will come online under existing state-level mandates.

Overall, Reicher and other backers of the congressional energy and climate efforts say the effort will increase jobs. "The job creation potential in energy efficiency is extraordinary," Reicher said.

David Foster of the Blue Green Alliance, a collaboration among six unions and two environmental groups, touted what he said would be the major job-creating effects of a 25 percent standard by 2025. He cited a study the group jointly released with the Renewable Energy Policy Project that found such a standard would create 850,000 manufacturing jobs if all the components were made in the United States.

Trade provisions

Foster also praised provisions in the sweeping House-passed climate bill that provide protections for so-called energy-intensive trade exposed industries, such as steelmakers.

A major provision is the authorization of so-called border adjustments, or carbon tariffs, on imports from countries that do not adhere to emissions-cutting measures.

The provisions, a priority for lawmakers from manufacturing states, are aimed at preventing "carbon leakage," in which energy-intensive manufacturing and jobs migrate to countries that do not impose emissions-cutting mandates.

The carbon tariffs are a priority for the Blue Green Alliance, as well. The group includes the United Steelworkers and the Sierra Club. The issue is under the jurisdiction of the Senate Finance Committee, which plans to add provisions to the Senate bill.

"The Blue Green Alliance has been working with the Senate Finance Committee and have made clear the importance of getting the border measure right," said Foster, the executive director, in his prepared testimony to the panel.

"If we have to tangle with the WTO [World Trade Organization] a little bit on this subject, I am perfectly happy to do that," said Sen. Sheldon Whitehouse (D-R.I.).

The Senate bill also joins the House bill in providing free allowances to these trade-exposed, energy-intensive industries, although the formulas differ slightly.

The Senate plan provides these sectors with 4 percent of the cap-and-trade program's freely distributed allowances in 2012 and 2013, rising to 15 percent in 2014 and 2015 and then phasing down after that.

Today's hearing is the second of three days of EPW Committee sessions on the bill. The measure requires reductions in U.S. emissions of 20 percent below 2005 levels by 2020 and 80 percent by 2050 and includes a suite of incentives and support for renewable power generation, carbon capture and storage, natural gas and other technologies.

The EPW Committee is hearing from 27 witnesses today, including the Virginia Manufacturers Association, a Defense Department official, utilities, environmentalists and others.

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