Energy sector seeks gradual phase-in of Clean Air Act

The country’s energy sector wants to implement the Clean Air Act (CAA) of 1999 in a staggered manner saying that following the law as it stands would result in higher fuel costs and even lead to power shortages.

The recommendations of the energy sector will be integrated in the implementing rules and regulations (IRR) which was finalized last Monday but which is still unsigned by President Estrada.

In a hearing last Tuesday, Energy Undersecretary Cyril del Callar told the Senate oversight committee on environment that the existing IRR will result in an increase in diesel prices by another P0.80 per liter and P2.06 per liter for unleaded gasoline.

Del Callar said that it would also result in an increase in power or electricity rates of P0.75 per kilowatthour (kWh).

He said this would occur due to the increased cost by the country’s oil refineries to acquire equipment and technology to decrease the chemical content of diesel and gasoline. Likewise, power plants will also have to incur huge loans to acquire and utilize pollution equipment and technology.

"The cost of compliance needs to be managed and inappropriate allocation of limited resources of both government and private sector will deprive resources for important social services," the energy undersecretary said. "Likewise, the additional burden to the public at this time is not without impact on our national security and stability at this time."

The country’s oil refineries have started spending millions of pesos for the acquisition of equipment and technology for the reduction of pollutants on gasoline and diesel.

Industry leader Petron Corp. said that it would spend P6 billion in its refinery operations just to implement the Clean Air Act. Sooner or later, the costs incurred will be passed on to the end users or consumers in the form of higher fuel costs.

The energy department and the industry should be given a grace period of five years based on the normal process of gaining access to foreign technology, securing a loan, getting the review and clearance from the National Economic and Development Authority (NEDA), tendering, engineering design, procurement and installation.

The law allows for only 18 months for implementation, with another 12 months maximum extension period.

Del Callar said that while the energy sector fully supports the Clean Air Act, it feels that it is unreasonable and rigid in its implementing periods and procedures.

As an example, he cites the case of power plants, which are scheduled for retirement within the next three years. "Must they still implement the high costs of installing expensive pollution equipment only to be scrapped a year later? And to think that these are power plants of cash-strapped National Power Corp. (Napocor)."

Other areas of concern that need "correction" in the law and the IRR are: the five-year grace period on geothermal power plants, and the environmental coverage on five megawatt (MW) power plants instead of 29-MW under US standards and 50-MW under World Bank standards for thermal plants; the fuel specifications under the 2003 and 2004 deadlines are not available in the international market (35 percent aromatics and two percent benzene in unleaded gasoline, and .05 percent sulfur for diesel).

The Senate oversight committee headed by Sen. Robert Jaworski called for a review of the law and its other concerns after five major government agencies and urged Congress for another review. However, any change in the CAA will require congressional action through a joint resolution by the two houses or amendments on the IRR.

The five government agencies are the Department of Trade and Industry (DTI), Department of Energy (DOE), the Department of Transportation and Communications (DOTC), the Department of Health (DOH) and the Department of Interior and Local Government (DILG).

"We believe in the objective of the Act, however the law is not without economic costs to the government, industry and the public. Any effect on these key sectors directly affects the government’s Medium Term Development Plan and the plight of the public," the joint statement of the five agencies said.