California Oil Interests Seeking Compromise on State’s Climate Programs

Source: By Jordan Goodwin, OPIS • Posted: Tuesday, July 12, 2016

Despite ongoing discussions between California Gov. Jerry Brown’s administration and the oil interests aimed at reaching a compromise on the state’s ambitious climate programs, industry sources on both sides of the table believe major shifts are unlikely in the coming months.

The ramped-up discussions, which were confirmed by the Western States Petroleum Association, involve both the state’s cap-and-trade program as well as the Low Carbon Fuel Standard (LCFS). Both programs face uncertain futures, with the cap- and-trade program in need of a reauthorization to continue after 2020. The program also faces a possible legal battle against the California Chamber of Commerce, which argues that the program is unconstitutional because it functions like a tax and was not approved by the necessary two-thirds legislative majority.

Knowing Brown’s need to push for stronger support from the state’s lawmakers, the oil interests are seeking to find common ground before the state’s 2016 legislative session end in late August and the generation election in November.

“As vested stakeholders in this process, we are serious and committed to improving the state’s current programs and ensuring legislative oversight concerning the decisions that will determine California’s next course of action to combat climate change,” WSPA President Catherine Reheis-Boyd said.

The renewed talks were first reported by the Los Angeles Times.

Some renewable fuel advocates fear that the LCFS has become a bargaining chip, being held ransom as the cap-and-trade tug-of-war continues between the oil companies and the governor. One LCFS source, however, said that the program’s survival is not in question, but rather, how intense the mandated carbon reductions will be through 2030.

“The LCFS might be a bargaining chip, but the bargain is LCFS at 15%, 20% or 30%,” the source said. “If you (hurt) us on cap-and-trade, it’s 30%. If you help us pass with two-thirds, we might consider less.”

The California Air Resources Board (CARB) has maintained that it has authority to continue cap-and-trade beyond 2020, but the state legislative counsel’s office has issued an opinion that it cannot do so without legislative action. As for the Chamber of Commerce ruling, the 9th U.S. Circuit Court of Appeals is expected to issue a ruling before year’s end.

Sen. Fran Pavley in June introduced legislation that would amend the original climate legislation (SB 32) to codify an executive order issued last year by Brown calling for a 40% cut in GHG emissions by 2030.

While multiple oil industry sources are pessimistic about any forthcoming major shifts in the legislation, those on the renewable side are much more cautious.

“Is it something to watch? You bet,” one biodiesel insider said. “Am I worried?
Not yet. Do I take for granted the positive policy position we are in today? I hope not.”