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Prop. 23: Why did Valero launch a campaign against California's climate law?

Valero_refinery_night02

In the most closely watched environmental election fight in the country, national conservation groups, Silicon Valley moguls, Hollywood celebrities and California politicians have waged a scorched-earth campaign against Valero Energy Corp., the nation's biggest independent oil refiner and the principal backer of Proposition 23, a Nov. 2 ballot measure to suspend California's ambitious global-warming law.

"The opposition has been able to characterize this issue as Texas oil companies … dirty companies
and dirty polluters," says Valero Chief Executive Bill Klesse.

Few major oil companies have joined Valero's ballot fight against California's effort to curb greenhouse gases, apart from Wichita, Kan.-based Koch Industries and Tesoro Corp., which is based in San Antonio, as is Valero.

So what do refineries such as Valero have at stake when voters take to the polls on Tuesday? "It's really an anti-fossil fuel law," Klesse told Wall Street analysts on a recent conference call. And Valero's business is fossil fuels.

But lost in the uproar over the initiative, which has attracted more contributions for and against than any measure on the ballot, is a basic issue: What would it take for Valero to comply with AB 32, California's Global Warming Solutions Act?

Would it cost the company hundreds of millions of dollars? Would it force the closure of California refineries? Would it mean passing huge costs onto the consumer? Would it mean shipping in gasoline to the West Coast from Asian refineries?

With the world's eighth-largest economy, California has an outsized impact. It has already begun adopting regulations under the act, including a mandate that one-third of the state's electricity come from solar, wind and other renewable sources within a decade and phasing out coal-fired electricity from out-of-state power plants.

Another rule would cut by 10% the carbon intensity of gasoline and other fuels. Carbon intensity is a measure of the amount of carbon emitted over a fuel's life cycle, including extraction, refining, transport and combustion. The new limit would discourage Valero and other refiners from using crude that comes from Canada's oil sands, extracted in an energy-intensive process, and ethanol that comes from plants using coal-fired power. Operating costs — and therefore gasoline prices — could increase.

"In a way, the low-carbon fuels [standard] is an electric-car mandate," Klesse said.

Regulators acknowledge as much: As gas prices rise, cars driven with electricity derived from renewable sources become more economical. The standard "invites electricity to go toe-to-toe with gasoline," said Stanley Young, spokesman for the California Air Resources Board.

And it creates powerful incentives for alternatives to the fuels Valero makes at its Wilmington plant. Shortly after California approved its low-carbon standard, Exxon Mobil Corp. announced that it would invest $600 million with a La Jolla biotech firm to create fuel from algae. Even Valero has purchased 10 corn ethanol plants in the Midwest.

AB 32's most expansive program is to be adopted in December: a cap on the emissions of large industrial facilities such as Valero's. As in Europe's cap-and-trade market, California would issue emission permits, which companies would then be free to buy and sell on the open market as a way to cut costs.

The design of California's cap-and-trade system is still under debate, with various industries lobbying intensely over the details. But officials say it will likely begin by granting free permits and phase in auctioned permits over the next decade.

To cut their carbon footprint, "refiners will have to use less energy to make the same product," Young said.

In fighting AB 32, Valero officials had suggested in the past that the cost of complying with the law could total $170 million a year for its two California refineries, in Wilmington and Benicia. But in the conference call with analysts, Valero acknowledged that the annual cost might be closer to $80 million. "We don't have the rules or regulations or how it's all going to work," Klesse said.

Those estimates don't take into account California regulators' pledge to introduce new rules slowly in the early years, and give breaks to firms that face out-of-state competition from unregulated competitors, such as Asian oil refiners.

But whatever the cost, Klesse said, "it will all be passed through to the consumer. The companies aren't going to able to absorb this or they're going to go out of business."

In fact, a rise in the price of fossil fuels, leading to a drop in consumption and combustion, is exactly what the state's global warming law is designed to accomplish. But that won't necessarily mean higher bills for consumers, Young said.

If a slew of AB 32 regulations accomplish their goals, Californians will drive more fuel-efficient cars, live in greener homes, use more energy-efficient appliances, live closer to public transit and use more electricity from renewable sources. That would drive down the need for fuel, along with the greenhouse gas emissions from Valero's Wilmington plant.

It could also hammer Valero's profits. Unlike integrated oil companies such as Chevron Corp., Royal Dutch Shell and Exxon, which drill and distribute crude oil as well as refine it, independents such as Valero and Tesoro cannot spread costs across other operations.Through the first nine months of 2010, Valero has posted a profit of $762 million on revenue of $63.6 billion, after two calendar years of losses.

But with gasoline demand still in a slump because of the recession, "independent refiners are fighting for their lives," said Doug Leggate, a senior analyst at Bank of America Merrill Lynch. Valero owns 13 refineries outside the state, but "AB 32 puts companies with California refineries at a gross disadvantage," Leggate said. "They would have to incur additional costs."

Proposition 23 is trailing badly in the polls, and Klesse was pressed in his call with analysts to explain how his company would deal with the reality that California is getting tough on carbon emissions."How does Valero respond to the cap-and-trade and low-carbon fuel provisions of AB 32?" one caller asked. "And how do you see the situation playing out in the state?"

After all the drama of the Proposition 23 campaign, all the inflammatory TV spots on both sides, all the political consultants and news conferences, all the tens of millions of dollars poured into the fight, Klesse's response was notably matter-of-fact. "We'll let the voters vote," he said."We're in business in California and it'll just continue. And we'll see what the actual regs look like, and then we'll take actions around them."

So was Prop. 23 worth the trouble? Read more here on why Valero seeks to suspend AB 32

--Margot Roosevelt

RELATED: Support for Prop 23 drops sharply

                Obama: No on Prop 23 and Corporate Polluters

                Meg Whitman want to "fix" California's global warming law

PHOTO: Valero's Wilmington refinery, near the Port of Long Beach, in October 2010. The company is the main funder of Proposition 23, a ballot initiative to suspend California's global-warming law. The law would require companies to slash their greenhouse gas emissions. Christina House /Los Angeles Times

 
Comments () | Archives (24)

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I go for California's global-warming law. Valero Energy Corp. is just afraid because they will surely be affected when this law is implemented knowing that this company hastens the catastrophe due to global worming since the refinery contributes much carbon dioxide and some more toxic elements to the air.

Points to ponder on AB 32:

° AB 32 is not a pollution law, it is a global warming law, but it won't have any effect on global warming.

° CARB over-estimated diesel emmisions by 340%. What else have they over-estimated?

° Key CARB personnel caught lying about credentials and then failing to reveal this after it is discovered internally before AB 32 passed, until after AB 32 passed. What else are they lying about and with-holding?

° CARB has admitted that California alone cannot have an impact on reducing global warming and CO2 emissions.

° US EPA acknowledges that US action alone will not impact the world CO2 levels;

° US EPA (11 July 2010) said that bills in Congress will not reduce the total use of gas and oil of 20 million gallons per day for decades.

° LAO (CA Legislative Analyst Office) stated: CA economy at large will be adversely affected by implementation of climate-related policies that are not in place elsewhere. (Letter to Dan Logue, 13 May 2010)

° Even CARB’s own economic experts have recognized the fact that jobs will be lost because of AB 32. In fact, they recommend establishing a “Worker Transition Program” to provide assistance to people who lose their jobs because of AB 32 regulations.

° AB 32 does nothing for local pollution, nor does Proposition 23 do anything to increase local pollution.

° 5.5% unemployment for 4 consecutive quarters has occurred 7 times since 2005, 14 times since 1999, and 22 times since 1987. See for yourself, the data is right here;
http://www.labormarketinfo.edd.ca.gov/?pageid=164

When the loudest objections to any candidacy or initiative are focused on vilifying its financial backers, this often indicates that its opponents' arguments on its merits are weak.

Vote yes on Prop 23 and suspend AB32.

Seems to me the real question is why Californians would vote against a proposition that would prevent jobs from fleeing the state. With a 12.4 percent unemployment rate and $12 billion budget deficit, YES on Prop 23 would seem to be the only sensible vote.

According to the anti-Prop 23 narrative, the Prop 23 campaign is a battle between the Goliath of Big Corporate Money supporting Prop 23 versus the David of underfunded concerned private citizens opposing Prop 23. Nothing could be further from the truth, given the avalanche of anti-Prop 23 money pouring in from environmental activist groups, liberal political action funds, and the renewable power industry.

The non-partisan group MAPLight.org, which is tracking campaign funding on both sides of the issue, reports that Prop 23 opponents have spent $30 million to defeat the initiative, while supporters have spent only $9 million. Liberal activist Thomas Steyer has alone spent $5 million to defeat Prop 23, the National Wildlife Foundation has spent $3 million, and the Sierra Club has spent another $1.2 million. These three alone have spent more money than all of the Prop 23 supporters combined.

Throw in such vested-interest contributors as the Green Tech Action Fund, the ClimateWorks Foundation, and the League of Conservation Voters, and it is not too difficult to see who is really playing the role of David and who is playing the role of Goliath in the battle for Big Money influence.

RE: Wayne Lusvardi -- That's why a number of carbon offset organizations are buying offsets, retiring them and forcing industry to produce with less and less carbon emissions.
Carbonfund.org is the leading provider of carbon offsets and has seen a number of large corporations sign up to offset their carbon footprint. The market is on board — we don’t need politicians pushing climate policy backwards.

So the L.A. Times admits that under cap & trade there is No net reduction in air pollution. If an energy company reduces its pollution but trades its credits to another energy provider so it can pollute there is no improvement in air quality. Even worse, a power plant is, say, the remote desert can trade pollution credits to Valero and it can continue to emit the same level of pollution from its refinery in the Los Angeles Air Basin, which traps smog and air particles. So the claim that California' Green Power Law would result in clean wind and solar power is bogus.

California is leading the nation in transition to alternative fuel vehicles. Fo a good chart on that and other info on Prop 23 and Prop 26, see:
http://8020vision.com/2010/10/25/californias-prop-23-morphing-into-prop-26/

So where do you think the plastics come from for the Electric cars??? Oil.... Oil can not go away....

Prop 23 is going to be defeated tomorrow, and here's why: because Californians like to be on the cutting edge, like we were in hightech and biotech, and that's where we're going on clean energy. This is the economic sector of the future, and it's already creating jobs in California TODAY--with five percent job growth in clean energy during the recession while overall job growth fell. Companies like Valero want to try to keep us in the past for as long as possible, simply because they are motivated not by the best interests of our state but only by their profits. If they had the sense of many other energy companies, instead of fighting AB 32, they would be looking to acquire some big solar and wind energy production facilities. California is positioned to lead in the global clean energy economy. Let's not quit while we're ahead. Vote NO on Prop 23.

Yet another stupid law that will make accountants and lawyers rich, and keep a bunch of bureaucrats employed.

Climate change is real, and it is happening, whether people believe that we are causing it is beyond the point - there will be countless populations under the rising water if we don't do anything about it.
Proposition 23 is written by a special interest, by an industry that makes its money from not paying for its pollution, and Californians are not buying it!
The hundreds of new businesses that have opened up because of stricter pollution regulation, and the countless jobs that have been created because of a greater demand for solar and wind energy will not go to waste!
California will say no to the oil industry, because a business has no business trying to control our state government and our regulations of them.
Check out EDF's Work:
http://www.edf.org/home.cfm

Boris Kazinik
EDF Ca Regional Embassador

We just talked about this on the Green T Hour on thursday.

www.greenthour.com

Follow the Money!

Check out who is behind these Propositions.

Then decide your vote!

http://prop26.dirtyenergymoney.com/

http://prop23.dirtyenergymoney.com/


Just a note to all you "Anti" clean air wingnuts. It is not about global warming. Sure some people focus on that. But California has been setting clean air standards since the 1960's. Its about doing the right thing.

The oil age is over. We are in the clean energy era. Jump on board my friends. Stop feeling the fear of change, stop preaching how all the jobs will disappear.

As a resident of California for 58 years, I will tell you this. We ROCK and if you don't like our progressive tradition, go away. We ship more money to the other 49 states than we ever get back from the Feds, so wake up, and pitch in.

Meg the Bostonian, never created a real job in her life. She just surfed a dot com bubble, barely.

The oil companies sponsoring Proposition 23 are adamantly opposed to AB 32. That much we know. If Proposition 23 becomes law, would they then want to see the rate of unemployment drop to 5.5%, which would be the trigger point to re-implement AB 32? Of course not. Yet these same oil companies are spending millions of dollars in an attempt to convince us that Proposition 23 is a solution to reducing the rate of unemployment. Even in my most optimistic frame of mind, I have trouble concluding that Proposition 23's "reduce unemployment" rhetoric is nothing more than a smokescreen for the real goal of its sponsors, which is to shelve AB 32 and hope that the rate of unemployment stays above 5.5% until it dies of old age.

I think it's funny to watch this anti-business climate in California push firms out of the state and then turn around and complain about the lack of job opportunity. I'm thinking of moving out of the state for awhile. At least until rampant poverty has pushed the price of houses down to Alabama levels and all the libs flee to a more prosperous state because they soiled their own nests.

Then maybe the decent people who fled California between the 1970's to today will come back and make it into a great state once again. That's the only way I see California getting fixed. The looters and the moochers who have their voices heard in Sacramento will continue running California into the ground while praising themselves for their "progressive" policies.

I retrospect, I hate the fact that the left uses the word progressive in their slogans. The only thing progressive that's happened is that we've gotten progressively worse.

And please, no one try to say all of this is Bush's fault. For the last 2 years he was in office the congress was controlled by democrats. As well, many of the root causes for the mortgage meltdown were implemented under Clinton. Just look up Franklin Raines and his ties with the Clinton Administration.

Remember the name Valero, it is worth telling your children to always know they are the company that wants to keep us in the oil age. The will of the people is not their concern. Profits baby, profits.

Valero is not alone. Oil companies stink. Tell the world they are the worst of the worst in terms of disrespecting the living things all around us.

I've always been a proponent of acting in accordance with the prevailing scientific view, which would lead us to reduce our carbon footprint as much as possible.. but... this law will not help. What will happen will be the Asian refiners will become more profitable by running high carbon fuels from Canada, the CA refiners will be forced to shut down capacity raising the likelihood of shortages and raising the costs of gasoline for CA consumers - more oil is transported from Canada to Asian refiners who then turn around and ship the gasoline back to CA, thereby actually raising the overall world carbon footprint. The only way to stop this outcome is to raise taxes on the imports, and therefore raise costs to CA consumers, making them less competitive.
We all agree that we need more renewable energy, but that needs to happen in the base case, without hamstringing CA competitiveness. The Chinese will be running their electric cars on coal fired electricity while at the same time selling us their cheap gasoline - or worse - keeping it all for themselves during an energy shortage.

Newportmac -

Pretty much every climate scientist (that hasn't been paid off) agrees that we are already experiencing climate shift and a gradual but accelerating global warming phenomenon brought on primarily by pollution from petrochemical and fossil fuel use. There's evidence of the phenomenon in global sea charts, weather history logs, and ice maps (The polar ice cap disappears completely now!). There is also evidence of human activity causing it, as there is a close correlation between petrochemical residue in core-based gas samples and global temperature increase. It sure as hell wasn't zebras, lizards, beetles, or fish burning all that oil and throwing it into the air.

The main groups fighting against this position are, unsurprisingly, the corporations which benefit from the processing, sale, and use of these fuels. As they have the money to advertise and spread their viewpoint, there is an illusion the anti-climate change movement has a legitimate scientific backing. The media, often being funded primarily by the same interests that own the fossil fuel companies, pass on this propaganda as fact. The American public generally believes what the media tells it to, which is why it is extremely unwise to trust a public opinion poll when in search for scientific facts.

As for the Tea Party, It also seems unwise to trust the scientific opinion of a bunch of admitted anti-intellectuals who automatically and categorically disagree with anything scientific or progressive while blindly agreeing to (very select parts of) a 2000 year old book that's been translated 7 times before they even got the copy that they don't read.

The fact is that dumping millions of tons of toxic chemicals and gasses into an environment for over 200 years will definitely change it, and I still can't see how it's not bloody obvious.

Eventually AB32 will push so many jobs out of state, there wont be any money in the budget to fund state agencies that will enforce the law.

"all the inflammatory TV spots on both sides" ??? i have seen ONE ad by the prop 23 side. and it was anything BUT inflammatory. if anything, i've been bombarded by the no side with spooky propaganda (much like the kind stephen colbert jokes about) concerning "pollution" (nothing to do with carbon dioxide or greenhouse emissions), and how AB32 will create all these new mythical green j0bs for everyone. CARB can't even get straight the numbers on how many jobs it will actually create, and how many will be lost. not to mention all the rest of the economic chaos AB32 will create (or as the LAO calls it, "economic leakage").

how about asking Thomas Steyer why he's put 2.5 million into the no side?

i am NOT moving to closer to public transit. public transit is inefficient, and does not take me where i need to go. i am not putting solar panels all over my house, too expensive, and i don't need that right now. if i'm going to be moving anywhere, it's out of the state.

It is clear what motivates oil and gas companies, making money. The oil and gas lobbyists are solid in their campaign of fear. Say yes to proposition 23 or you will not be able to feed your families.

Despite my objection to this tactic there is a far greater environmental issue facing our planet, toxification of our natural environment through pollution. If addressing GHG emissions is synonymous with treating a future potential of Parkinson's disease, pollution is equivalent to metastasized cancer. We need to deal with both, but, first things first.

The proposed Californian climate change regulation maybe trendy, but, it will do nothing to reduce global GHG emissions or minimize pollution, it will only push industry offshore to countries with even less environmental controls and local jobs will disappear.

If I were a Californian I would vote yes to proposition 23 but then pressure the government to re-focus money and efforts to reducing toxic pollution and to implementing better waste management. This would have the added effect of creating thousands of real environmental jobs.

James

Nice detailed work Margot.

California leads the nation in transition to alternative fuel transportation. For some good charts showing the trends, see:
http://8020vision.com/2010/10/25/californias-prop-23-morphing-into-prop-26/

Jay Kimball
8020 Vision

October 2010 Pew Report
http://pewresearch.org/pubs/1780/poll-global-warming-scientists-energy-policies-offshore-drilling-tea-party

Is there solid evidence the Earth is warming?
51% believe the Earth is either not warming or warming due to natural patterns.
34% believe the Earth is warming due to human activity.
6% believe the Earth is warming but don't know why.
9% Don't know if the Earth is warming.

How serious a problem?
63% indicate its a somewhat to very serious problem.
34% indicate it not too serious or is not a problem.
3% don't know if its a problem

Is it a problem requiring immediate government action?
Yes: 46%
No: 50%
Don't Know: 3%

Do scientists agree the Earth is getting warmer?
Yes: 44%
No: 44%
Don't Know: 12%


Of those believing Global Warming is a Very Serious, Somewhat Serious, or Not Too Serious problem.

Is there solid evidence the Earth is warming [due to human activity]?
Tea Party Republicans: 84% No
Republicans: 71% No
Democrats: 31% No
Independents: 48% No

How serious a problem?
Tea Party Republicans: 74% Not too serious or Not a problem
Republicans: 57% Not too serious or Not a problem
Democrats: 15% Not too serious or Not a problem
Independents: 35% Not too serious or Not a problem

Is it a problem requiring immediate government action?
Tea Party Republicans: 39% No
Republicans: 39% No
Democrats: 19% No
Independents: 31% No

Do scientists agree the Earth is getting warmer?
Tea Party Republicans: 71% No
Republicans: 58% No
Democrats: 32% No
Independents: 45% No

Note: I encourage you to Vote YES on Prop 23. AB32 needs to eliminate the Cap and Trade provisions, eliminate the unnecessary oversight Fees, eliminate the reliance on flawed Green House Gas assumptions, correct the vague language that will introduce Environmental Red Tape that will do more damage than good, ensure AB32 doesn’t undermine The Rule of Law, and make non-governmental agencies like CARB accountable to the taxpayer for their mistakes.


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