In this dry summer, water is on everyone’s mind, but the Legislature will be dealing with the cost of another liquid precious to Californians – gasoline.
Starting Jan. 1, a cap-and-trade policy on oil and gas companies to help curb release of greenhouse gas emissions will begin.
“Oil companies have made it very clear this will increase gas prices by an estimated 15 cents a gallon,” said Amanda Fulkerson, spokeswoman for Assembly Minority Leader Connie Conway, R-Tulare.
According to the Lundberg Survey, gas prices are pushing $4 a gallon and California drivers pay the highest fuel taxes in the nation.
With one month left in the Legislature’s session, Assemblyman Henry Perea, D-Fresno, has rewritten one of his bills (AB69) to postpone the cap-and-trade policy for three years.
The bill is in the Senate Rules committee, which controls the flow of legislation in that house. It has been there since July 3 and has not moved despite the Legislature returning a week ago. If the bill is not sent out of the committee, it will be dead for this year.
With all 80 Assembly districts and half the 40 Senate districts to be decided in the November election, raising gasoline prices has a political edge.
“Not every consumer has the option of turning to alternative transportation to reduce their gas use,” said Alicia Isaacs, spokeswoman for Perea. “We need to ensure gas prices don’t soar so high that working class people find themselves unable to get to work.”
“Both parties are paying attention to this issue, and we’re aiming for the governor’s attention,” said Fulkerson. “We worry this increase will come up with little notice and catch people off guard.”
This increased regulation of oil and gas companies comes from the California Global Warming Solutions Act of 2006. The companies are to partake in “a market-based compliance mechanism,” which essentially mandates a cap-and-trade policy to reduce their greenhouse gas emissions.
Signed by Gov. Arnold Schwarzenegger, the legislation was designed to decrease greenhouse gas emissions by as much as 20 percent, or 1990 levels, by 2020.
To reduce climate pollution, a cap-and-trade program was created by the state Air Resources Board to bring about a cost-effective reduction of greenhouse gases.
Through the program, a cap is set on emissions to reduce the amount of pollutants released. A company that reduces pollution cheaply ends up with extra allowances that can be sold to other companies, creating a trade market.
Regulating oil and gas companies is a step in reaching this goal, as petroleum-based transportation fuels add up to roughly 40 percent of California’s greenhouse gas emissions according to the Air Resource Board.
Transportation fuels are to be under the cap starting New Year’s Day.
In late June, along with 15 other Assembly members, Perea sent a letter to the board to urge delay or redesign the program.
“The cap-and-trade system should not be used to raise billions of dollars in new state funds at the expense of consumers who are struggling to get back on their feet after the recession,” said Perea in a press statement.
Gov. Jerry Brown’s office did not respond to calls about his position on the bill, but Mary Nichols, chair of the board appointed by the Democratic governor, opposed the delay in a letter to Perea and his colleagues.
“To remove fuels from the program at this late date would be disruptive and a major setback,” Nichols wrote. “It would have a deleterious effect on the market because many businesses have purchased millions of allowances and adjusted their business activities on the assumption that fuels would be included starting in 2015.”
Nichols noted that since January 2011 there have been 23 separate instances of retail gas prices fluctuating in a week by 10 cents or more a gallon.
Despite the environmental effects, some Democrats and Republicans seem adamant on delaying the regulation.
“The delay until 2018 would be a delay of one compliance period,” said Isaacs, Perea’s spokeswoman. “It would give CARB enough time to better understand how the inclusion of transportation fuels will impact consumers.”
According to CARB, oil and gas companies have had five years to prepare for the cap-and-trade.
“It is important to note that fuels were added under a carefully phased schedule,” wrote Nichols. “The process included dozens of public workshops, hundreds of meetings with stakeholders, coordination with other state agencies, briefings and discussions with members of the Legislature, and extensive consultation with leading economic and regulatory design experts.”
Earlier this year, the Public Policy Institute of California released a survey on Californians’ opinions on the original law to decrease greenhouse gas emissions.
The survey showed that three-in-four Californians support the compliance of California’s oil companies with the cap-and-trade policy; however, that support lowers to 39 percent when higher gas prices were a consequence.
*Ed’s Note: CORRECTS 2nd graf to delete reference to tax increase commencing Jan. 1, updates 6th graf with AB 69 status, expands written comments of ARB Chair Mary Nichols and notes that industry had five years to prepare for change, deletes word ‘tax’ from headline and recasts.