Valero CEO: Climate Bill Threatens U.S. National Security

(MoneyWatch)  Climate change legislation has been called -- depending on whose doing the talking -- both a job killer and creator; a costly endeavor that will crush the energy industry and a cheap alternative compared to the havoc global warming will wreak on the U.S. economy.

The national security argument also has been used by U.S. foreign policy leaders worried that climate change will create political instability.

Bill Klesse, CEO of Valero Energy, the largest U.S. refiner, took far different view Wednesday on the national security issue.

One of the gravest threats to U.S. national security is climate change legislation, he said, speaking before the Senate Environment and Public Works Committee.

Here is Klesse's argument:

• The Senate bill and its House counterpart requires U.S. refiners to pay for greenhouse gases emitted at their facilities as well as hold them accountable for emissions from their fuel products after they reach consumers;
• Compliance for "consumer emissions" alone -- with carbon at $20 a ton -- will cost Valero an additional $6 billion a year;
• The total estimated cost to domestic refiners would be $67 billion a year;
• As a result, the climate bill provides a competitive advantage to foreign refiners and producers;
• A growing percentage of refined products -- rising from 2 percent in 2000 to more than 10 percent today -- are being imported into the U.S. fuel supply;
• Cap-and-trade legislation will only increase imports of refined products, making the U.S. even more reliant on "foreign" countries for fuel than ever before.

Klesse used pretty strong language -- stuff like impending economic warfare -- in his remarks to the committee. He talked about "a new economic world order" that this legislation could bring.

The U.S. refiners are suffering right now even without cap-and-trade, thanks to a combination of stagnant demand for gas, rising inventories and high crude prices.

And considering some of the latest three-quarter earning reports, it's not surprising that Klesse's comment took on such an ominous tone.

Valero reported Tuesday a net loss of $489 millionfor the third quarter compared to net income of $1.2 billion for the same year-earlier period. Refiners like Valero do not produce oil, which means they can't lean on high crude prices to get them through days of weak demand for gas.

Instead, as crude prices climb, so does production costs for independent refiners, like Valero. Back in those high-consuming gas days, Valero would have simply raised its price at the pump. But it can't now because the demand isn't there and inventories are too high.

For additional BNET Energy coverage on climate change and pending legislation:

• Sue Big Oil Over Global Warming? Court Tells Katrina Victims, Yes You Can!
• India Ponders Changing its Climate Rhetoric
• Tipping Point? Republican Hints at Support for Climate Change Bill
• Cap-and-Trade and Carbon Taxes: Equal Opportunity Boondoggles for Governments
• Nukes, Coal and the National Security Argument
• The Bureaucratic Cost of Cap-and-Trade Legislation
• Sarah Palin Blast Cap-and-Trade Plan
• Carbon Offsets: The Next Cash Crop for Farmers?
• Putting a Cost on Cap-and-Trade Legislation