Oil & Industry: Connecting the Dots in the War Over California’s Greenhouse Gas Law

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The fight over California’s greenhouse gas emissions law is being described as Texas oil vs. California’s big employers by supporters of the law — and as California’s vulnerable manufacturing sector vs. job-killing regulators by opponents who want to block it.

Last week, the Sacramento Bee confirmed that oil money is fueling the signature gathering effort to place an initiative on the state’s November ballot that would suspend the emissions law, known as AB 32. The initiative’s backers, calling themselves the California Jobs Initiative, have raised $966,000, with 89 percent of the funding coming from oil companies and 70 percent of that from oil companies headquartered in Texas.

Specifically, financial disclosure statements show that Tesoro Oil Company, Tower Energy Group of Torrance and the World Oil Corporation of Houston have each kicked in $100,000 to help the initiative gain enough signatures to qualify for the ballot. Southern Counties Oil Company gave an additional $50,000, and JACO oil put in $10,000. The bulk of the money to suspend the law, however, has come in the form of $500,000 from Texas-based Valero Energy Corporation.

Bill Day, executive director of media relations for Valero, disputes the description of the company as a Texas outsider trying to influence California.

“We employ 1,600 people in California in our refineries and gas stations,” Day says. “We own 80 gas stations and contract with many more in the state to carry our brand. We have a vested interested in the California economy.”

I asked Day why the company, which has invested in Texas wind farms and ethanol plants in the Midwest, was investing in an effort to get AB 32 suspended rather than putting its money into renewable energy development in California.

“Valero has looked at all the data, and we’re convinced that this [AB 32] is going to eliminate far more jobs than it will create. We’re talking about jobs that exist right now at our refineries that provide people with good salaries, health care and other benefits that are in danger because of this measure,” Day said, then added, “we’re in the gasoline making business and we make a lot of gasoline in California.”

Playing Both Sides?

In the thick of the fight over AB 32 is the California Manufacturers and Technology Association (CMTA). The group claims it is unconvinced about the jobs data, but its 45-person board — which includes representatives from Valero and five other oil companies — voted to support the initiative to suspend AB 32. At the same time, CMTA is a founding member of what’s known as the AB 32 Implementation Group (AB32IG); CMTA Vice President of Governmental Affairs Dorothy Rothrock is the group’s co-chair.

“No one has proven to us that based on a California-only regulation that they’ll be able to keep all the existing jobs here now and create new green jobs,” CMTA media spokesperson Guido DiCaro said.

He repeated several times that the association was not convinced by any of the studies on AB 32 — neither those claiming job creation nor those claiming job losses if the law is implemented. CMTA has commissioned its own study in collaboration with California Lutheran University which it plan to publicly release in the next three weeks.

CMTA’s position puts the organization at odds with some of California’s largest employers including Google, Waste Management and CMTA member Chevron, which don’t support the initiative to suspend AB 32.

DiCaro said that there was not an issue with CMTA both being a member of an organization calling itself an AB 32 implementation group and supporting the initiative to suspend AB 32.

“What we really want is to implement AB 32,” DiCaro said. “We’re not trying to stop AB 32 at this point.”

He did not dispute, however, that the initiative, which calls for suspending the law until California has four consecutive quarters of unemployment below 5.5 percent, would essentially stop AB 32 completely. The state’s unemployment rate is now 12.5 percent. In the past 20 years, it has been under 5.5 percent for four consecutive quarters twice — in 2000 and 2006.

Critics of the Implementation Group say that AB32IG is trying to stop AB 32 and have called it an industry front group. One member even acknowledged in January that the goal of the implementation group was not to see AB 32 implemented but to ensure that its impact on business was minimalized. The 2006 law requires the state to cut its emissions to 1990 levels by 2020.

CMTA was the location this week for AB32IG’s release of a new report from the Pacific Research Institute that claims that AB 32 will destroy California jobs. A previous study commissioned by AB32IG making similar claims of high costs and job losses, the Varshney study, has been widely criticized for inaccuracies, including harsh words from the non-partisan Legislative Analysis Office (LAO).

Supporters of AB 32 believe the latest report is also suspect. Valero lobbyist Michael Carpenter is a board member at the Pacific Research Institute (PRI), the funders of the study. Critics point to the organization’s funding from the oil industry; since 1998, PRI has received $530,000 from Exxon Mobil alone.

The report’s author, Thomas Tanton, is a senior research fellow at PRI and also a consultant to the oil and gas industry. Prior to his role at PRI, he was a vice president at the Institute for Energy Research, which received more than $300,000 from Exxon Mobil between 2003 and 2007, according to Greenpeace.

Tanton’s report is based on the premise that the state’s cap-and-trade program will use 100 percent auction of emissions allowances with a price of $60 per ton of emissions, far higher than the current market price. It claims that under those conditions, implementing AB 32 will result in “annual job losses to the California Economy of 76,000 to 107,000 the first year growing to perhaps 485,000 jobs in 2020” and “lost economic activity of nearly 2 percent of gross state product, or about $250 to 350 billion over 10 years.”

Susan Frank of the California Green Business Alliance says Tanton’s premises are wrong. “There is no recommendation to start with 100 percent auction, so the basic premise of his analysis is wrong. The ARB Scoping Plan recommends starting at 10 percent and increasing gradually. And the EAAC has not made a recommendation of 100 percent auction either.”

Though Shelly Sullivan of AB32IG says that EAAC, the Economic and Allocation Advisory Committee, does recommend 100 percent auction, the committee released its final recommendations this week, which do not specify an auction percentage. Sullivan also says that the $60 per ton price is based on an average of existing recommendations to start at $20 a ton and gradually increase to $100 per ton.

Steve Maviglio, spokesperson for Californians for Clean Energy Jobs, a group supporting AB 32, says the report is too close to oil money influences.

AB 32 opponents, however, say that jobs, not oil, are at the center of their opposition to implementation.

“California has lost 630,000 manufacturing jobs since 2001, that’s a third of the industrial base,” says DiCaro. He believes that the effects of AB 32 are too unclear and potentially risky to implement. “Why implement any regulation on information we don’t have? We are moving forward to mandate regulations without any basis in what these mandates will actually cost.”

But critics of CMTA say that Rothrock was speaking out against AB 32 in 2006 when it was signed into law and unemployment in the state was only 4.8 percent.

Further, AB 32 supporters point to a number of studies which show that AB 32 will be a creator of as many as 403,000 green jobs. They also highlight the vibrancy of California’s green jobs sector with 2.5 times greater growth than the rest of the state’s economy. Proponents of AB 32 say that green jobs are the only way forward in California and that suspending implementation of the law is the real threat to California’s economy.

"Last week, more than 350 clean tech businesses jammed the Sacramento Convention Center for the Green Technology expo, attracting more than 6,000 attendees," says Maviglio. “AB 32 is already spurring billions in venture capital investment and innovative small businesses, which is fairly remarkable given the sluggish state of our economy, and this is just the tip of the iceberg.”


See also:

California’s Landmark Greenhouse Gas Law Comes Under Attack

Venture Capitalists: Move to Repeal California Climate Law Endangers a Job Creator

Study: Carbon Cap Has Little Impact on Small Businesses