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Major Challenges Facing PetroChemical Industry
[Rachel's Introduction: Chemical industry executives fear that Europe's new chemicals policy, REACH -- the registration, evaluation and authorisation of chemicals -- reflects an effort by environmental activists "to bring their own version of the precautionary principle, a thinly disguised synonym for product substitution, to the global arena".]
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WASHINGTON -- As several thousand executives gather in San Antonio, Texas, this weekend for the annual International Petrochemical Conference, industry leaders say they are facing a raft of challenges from climate change, energy costs, security mandates and a rising tide of global regulatory initiatives.

Sponsored by the National Petrochemical & Refiners Association (NPRA), the 33rd annual petchems meeting also comes at a time when the US industry is anticipating what NPRA president Charles Drevna calls "one of the most politically uncertain years that we have experienced in a long time".

The outcome of the US national elections on 4 November this year could significantly alter the regulatory landscape and business environment for chemical companies.

"The US Congress began this year to consider climate change legislation that could dramatically impact feedstock supplies and cost to operate in the US," Drevna said, referring to bills pending in the Senate that would impose a cap and trade emissions control mandate on US manufacturing, transportation, power generation and natural gas production.

The controversial cap and trade legislation is aimed at reducing industrial and vehicle emissions of carbon dioxide (CO2) and other greenhouse gases (GHG) in hopes of halting and perhaps reversing global warming.

Chemical companies worry that a federal mandate to force emissions reductions will among other things cause a stampede of power companies away from coal to natural gas as a fuel, putting major additional demand and pricing pressure on that principal feedstock for the US petrochemicals industry.

"US natural gas prices remain high," Drevna noted, with gas in the $9/m Btu range compared with $2/m Btu in 1999, "and little is being done on Capitol Hill to open up domestic exploration to increase supply."

Cap and trade legislation -- seen as having little chance of becoming law while Republican George Bush is president -- is seen as more likely if Democrats capture the White House and increase their majorities in both the House and Senate.

"Climate change, chemical risk management and security policies will undoubtedly affect our future business practices," Drevna said, "and what those policies will look like will in large part depend on the outcome of the November elections."

In addition to cap and trade, many in Congress want a major rewrite for the principal US chemicals regulatory system, the Toxic Substances Control Act (TSCA). That statute has not seen any major changes since first enacted in 1976, and some on Capitol Hill argue it should be recast along the lines of the European Union's REACH programme.

Drevna warns that REACH -- the registration, evaluation and authorisation of chemicals -- reflects an effort by environmental activists "to bring their own version of the precautionary principle, a thinly disguised synonym for product substitution, to the global arena".

Security issues also pose an increasing risk for US chemicals with a new effort afoot in the US Congress to revise the year-old federal mandate for antiterrorism precautions at high-risk chemical facilities. The pending legislation would authorise federal regulators to impose inherently safer technology (IST) measures on high-risk facilities on the theory that less toxic feedstocks and lower intensity production processes would make such sites less attractive as terror targets.

NPRA spokesman Bill Holbrook said the association's member firms are concerned about the IST provisions, which he termed "simply additional new environmental rules masquerading as so-called security standards".

More than 3,200 industry officials attending this year's conference will hear presentations on petrochemical technology and innovation advances and supply chain challenges. The political uncertainties will be reviewed by pollsters Peter Hart and Frank Luntz along with former US House Speaker Newt Gingrich.

Among industry executives at the IPC will be 1,200 international officials representing 48 countries, Holbrook said.

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