NEW YORK (THE WALL STREET JOURNAL CAPITAL BLOG via Dow Jones Newswires), Jun. 8, 2009

ConocoPhillips, unlike some of its peers in the oil patch, tried to play ball and help shape U.S. climate policy. Conoco, a charter member of the U.S. Climate Action Partnership, publicly called for the type of cap-and-trade program Congress has just produced.

"It's important to have a seat at the table," Conoco Chief Executive James Mulva said in an interview, defending his company's decision to lobby for federal action on climate change. The problem is, Mulva's not happy with what's being served.

The oil industry and plenty of outside observers figure the Waxman-Markey climate bill gives the electricity industry too much and the transportation sector too little. In other words, for all its 1,000 complicated pages, the bill boils down to a glorified gas tax.

That's got Mulva and other oil executives steaming. Waxman-Markey would give oil refiners just 2% of the free emissions permits being handed out; the electricity sector, in contrast, would receive 35% of the permits.

According to Mulva's sums, the total CO2 footprint of the oil and gas industry -- including exploration and production, terminals, pipelines and refineries -- is 4% of total U.S. emissions. Some 24% comes from consumers -- from the tailpipes of automobiles and trucks. Refineries, he says, are being unfairly penalized, and they'll find it nearly impossible to pass on the increased costs to consumers.

That would leave domestic refiners vulnerable to "unregulated foreign competition," and could result in a "reduction in U.S. refining capacity," leading to more imports of transportation fuel and the loss of U.S. jobs, Conoco says.

The argument is part of the oil industry's wider pushback against a bill that looks more onerous than it feared. Chevron boss David O'Reilly called for "energy realism" in a S.F. Chronicle op-ed Sunday, noting that transportation accounts for just 15% of global greenhouse-gas emissions.

Other analysts tallying giveaways in the Waxman-Markey bill reach a similar conclusion. Geoff Styles writes, "In other words, after you sift through all its complexity, Waxman-Markey's cap & trade system becomes in essence a targeted tax on gasoline, diesel and jet fuel."

So what's the solution? Mulva is now touting a "hybrid" approach, in which stationary sources such as oil refineries and power stations would be subject to cap-and-trade, while emissions from transportation would be hit with a carbon tax.

The bottom line is that the political horse-trading that made it possible to win support for the big climate bill cuts both ways -- creating winners and losers. As the battle to shape the final legislation heats up this summer, even companies that tried to play nice -- like ConocoPhillips -- may take their marbles and go home.  

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