ConocoPhillips Statement on American Clean Energy and Security Act of 2009

HOUSTON, May 19, 2009 --- ConocoPhillips views the current Congressional debate regarding climate as important because it underscores the complexity in developing legislation that balances our nation's economic growth, national security and greenhouse gas (GHG) emission reduction needs. The American Clean Energy and Security Act of 2009 represents an important step in this process.

While the American Clean Energy and Security Act of 2009 addresses some of the policy issues critical to our company, some key issues remain unresolved. The proposed bill will establish a cap on GHG emissions, and regulated entities must submit allowances, or permits, to cover their emissions. The government will distribute some of these allowances to some industries without being subject to auction in order to dampen the economic impact of the cap-and-trade program on these industries and their consumers. ConocoPhillips supports fair and equitable allocation of allowances to fuel producers and their consumers and we are concerned that the current draft of the American Clean Energy and Security Act does not meet this threshold.

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Under the provisions of the proposed bill, U.S. refiners will have a legal compliance obligation to purchase allowances for GHG emissions from their manufacturing facilities, as well as allowances for consumer GHG emissions associated with using refined petroleum products, such as transportation fuels. This means that U.S. refiners will be bearing the cost for roughly one-third of the nation’s GHG emissions but only receiving 2 percent of the total allowances under the current proposal. It is likely that refiners will not be able to pass along 100 percent of the costs of securing allowances, and they should be provided an allowance allocation for unrecovered costs.

This situation also will be impacted by imports of fuels from outside the United States. Like other trade-exposed U.S. industries, the domestic refining industry will face competition from fuel producers in countries that either choose not to regulate GHG emissions or choose to protect their domestic industries. We expect our exposure from foreign refiners to increase in the future in large part due to several very large refineries being constructed overseas that are targeting the U.S. market.

The current emission allowance allocation proposal in the bill fails to provide adequate protection to domestic refiners from unregulated foreign competition and leaves the sector exposed to undue economic harm. The reduction in U.S. refining capacity that could result from this policy would lead to increased imports of transportation fuel, erosion of national energy security, and loss of American jobs.

ConocoPhillips remains committed to the development of a comprehensive, national climate protection program that addresses greenhouse gas emissions while ensuring the availability of the secure, affordable and reliable energy supply necessary for continued economic recovery and growth. We look forward to continued constructive collaboration on this important issue.

Source: ConocoPhillips