CERAWeek ’15: US refining leaders see headwinds from outdated legislation

By Ben DuBose
Online Editor

HOUSTON -- The US downstream sector continues to grow and expand based on the availability of cheap and affordable shale feedstocks, but industry leaders say legislative headwinds are continuing to prevent it from reaching its full potential.

Gary Heminger, president and CEO of Marathon Petroleum, offered his outlook in a downstream plenary session at the annual IHS CERAWeek conference in Houston.

Heminger said that global demand for refined products continues to grow, adding that the US industry has a unique ability to quickly respond and adapt to this resource boom. 

"But the refining industry still faces significant headwinds, primarily in the form of challenging policy," he warned.

Heminger cited the Renewable Fuel Standard (RFS) and the Jones Act as two major policies that have created tremendous uncertainty for refiners, saying he believes they should both be repealed.

In a Q&A session, the Marathon Petroleum chief continued to drive home that theme. When asked by a conference attendee how Canadian heavy crude oil might impact the Gulf Coast refining market, Heminger said that it depends on pipeline infrastructure, as Gulf Coast refineries, particularly those in Texas and Louisiana, already possess the operating equipment to run Canadian heavy crude.

But despite that ability, the Keystone XL pipeline -- the largest proposed project to deliver that Canadian crude to the US Gulf -- has still yet to be approved.

Jack Gerard, president and CEO of the American Petroleum Institute (API) trade group, also took part in the downstream panel and agreed with many of Heminger's points.

Gerard said the key challenge facing the petroleum industry is the uncertainty caused by public policy, and most notably the Renewable Fuel Standard. In the case of the RFS, Gerard says the policy has "outlived its usefulness".

Nonetheless, Gerard held fairly optimistic views moving forward. Gerard said that US refineries produce more fuel than ever before and also noted that the abundance of new US energy resources has helped to reduce greenhouse gas (GHG) emissions to 20-year lows.

Because of those factors, Gerard believes the industry has a compelling case to the American public for its value.

"The key to building suppot for US energy projects is to engage and educate the public," Gerard said.

Gerard pointed out that despite significant opposition to the Keystone XL pipeline project, 70% of the population still believes the pipeline should be built. Looking forward, both Gerard and Heminger are hoping that broad coalition of support can eventually lead to a deal.

The IHS CERAWeek conference continues through Friday at the Hilton Americas in downtown Houston.

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