U.S. oil refiners face $100 bln climate bill-group

By Tom Doggett

WASHINGTON, Oct 26 (Reuters) - U.S. oil refiners may have to pay $100 billion a year to cap their greenhouse gas emissions under climate change legislation being considered by Congress, an industry consulting group warned on Monday.

Alan Gelder, Head of Downstream Oil Consulting for Wood Mackenzie, which prepared the report, said the cap-and-trade system being planned would require U.S. refiners to purchase pollution credits in 2015 "to the tune of $100 billion per year."

Environmental groups disagreed, saying the costs of reducing emissions blamed for global warming would be far less than the consultant estimated. An energy expert at the Center for American Progress dismissed the high cost estimate as "scare tactics."

The legislation would require oil refiners, utilities and other industrial facilities to obtain permits for the right to spew emissions linked to global warming. The number of permits available would be gradually reduced overtime, cutting U.S. emissions further.

To ease the transition, refiners and other industries would receive some permits for free in the beginning under the so-called cap-and-trade system.

Gelder said oil refiners are being shortchanged compared to sectors such as utilities which would get a much bigger share of the permits, even though the oil sector accounts for a big chunk of U.S. greenhouse gas emissions.

"The free allocation -- or cap -- for the U.S. refining sector equates to less than 5 percent of total carbon emissions from the production and consumption of transportation fuels in the U.S.," said Gelder.

The climate bill comes as many refiners are "under severe financial pressure" from weak petroleum demand due to the recession, forcing facilities to operate at lower capacity levels, according to Gelder.