By: Carl Graham, President, Montana Policy Institute
Tom Mullikin, Senior Partner, Moore & Van Allen PLLC
Energy. It is the lifeblood of the American economy. For this reason, it is no surprise that energy policy discussions receive a great deal of attention. Done wrong, energy policy can significantly harm the economy. That is a real concern as the U.S. Congress and individual states debate legislation that aims to address climate change and potentially overhaul our country’s energy system.
Montana is blessed with abundant natural resources that help fuel the economy. As a provider of North American energy sources, Montana contributes to our nation’s energy security. Increasing our energy security should be a central goal of any energy policy. However, policy proposals being considered in Congress and by the Western Climate Initiative (of which Montana is a member) would put our energy security and our economic prosperity at risk.
One such policy proposal is called a Low Carbon Fuel Standard (LCFS), which targets transportation fuels. The LCFS is being billed as a way to ensure development of clean, secure energy while reducing greenhouse gas emissions in the United States.
Here’s how it works. Under an LCFS, fuels are assigned a carbon intensity “score” based on the energy required to bring them to market. Fuels with a high score are discouraged while lower scoring fuels are encouraged. In the end, proponents argue, we will have fewer greenhouse gas emissions from vehicles and an incentive for industry to develop cleaner forms of transportation energy. But LSFS proponents only tell one side of the story and ignore significant long term negative impacts on our environment and our economy.
Here’s what LCFS proponents fail to tell you. First, the LCFS is an unproven standard relying on undeveloped technology. In Montana, this policy will put the entire region’s energy security at risk. According to the Energy Information Agency, crude oil from Canada makes up over 90 percent of the crude oil refined in Montana. Canada is the top importer of crude oil into the U.S., and an increasing amount of Canadian crude is coming from Alberta’s oil sands. Because this oil is heavier, it will receive a higher carbon intensity score under an LCFS, which will discourage its use.
If this happens, Montana and other states that use Canadian crude, particularly in the Upper Midwest, will be forced to rely on lighter crude from the Middle East instead of crude oil from a friendly, neighboring country. An LCFS will also guarantee volatile gas and commodity prices, the loss of U.S. refinery and pipeline jobs, and, ironically, an increase in global greenhouse gas emissions.
That’s right, an LCFS will actually increase greenhouse gas emissions. If we don’t buy crude oil from Canada, the crude will be shipped overseas, greatly increasing transportation emissions. Then it will be processed in countries like China and India which have weaker environmental regulations. China recently demonstrated its intent to use oil sands crude with a major investment in a Canadian oil sands project by a Chinese oil company. It defies common sense to send Canadian crude oil 6,000 miles to China, instead of sending it next door to Montana.
Our elected officials have an opportunity to look beyond “feel good” knee-jerk policy reactions and consider the real implications to Montanans of LCFS. This policy is bad for national energy security, bad for consumers, bad for the environment and bad for Montana.