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On state’s climate change policy, regulators courting disaster

It’s time to separate fact from myth about AB 32.  If we don’t, we could be facing a future of $6.50 gas prices AND a return to fuel lines and rationing.  This bleak future could be with us a lot sooner than anyone thought.

Now that the California Air Resources Board has finished writing the main regulations that make up the bulk of the state’s climate change policies, we’re beginning to see a number of studies take a hard look at the likely impacts from those policies.  While they don’t all reach the same specific conclusions, all of them make it crystal clear that Californians will be paying more – a lot more – for fuel and everything else under this cascade of new regulations.  Importantly, these new regulations will not provide any discernible difference in global carbon emissions, so California consumers get to be the Guinea pigs trying out this new venture for the rest of the world.

The study that concerns me the most is an analysis by the Boston Consulting Group commissioned by the Western States Petroleum Association.  BCG concludes refiners in California will not be able to comply with the Low Carbon Fuel Standard after about 2015 or 2016 and will therefore not be able to produce enough fuel to meet the state’s huge demand.  Other studies are reaching this same general conclusion.  At the same time fuel suppliers will be struggling to comply with an infeasible fuel regulation, they also will be required to pay for all of the greenhouse gas emissions produced by the state’s 27 million cars and trucks – a multibillion dollar cost that will be passed on to consumers.  All while our state tries to climb out of a deep and lasting recession.

As BCG reports, this combination is likely to create a situation where gasoline prices could spike up by $2.50 or more and there is inadequate fuel to meet demand.  California has experienced state-only fuel cost spikes of in the past, where state refinery problems created supply pinches.   So this is no “theoretical” assumption.

Equally frightening is putting a “rookie” agency (CARB) in charge of managing an untested credits trading program.  We had “experts” regulating trading in 2008: what would the impact have been if they had no idea or experience in regulating banks, traders and exchanges?  Melt-down quickly comes to mind.

The California Independent Oil Marketers Association, whom I represent, is made up primarily of small, independent, family-owned businesses who sell gasoline and diesel to retail service stations, farmers, construction sites, transport fleets and many other segments of the economy.  Members also own service stations throughout the state.  They will be on the front line in the not-so-distant war when consumers revolt at the sky high gas prices and fuel shortages and the bureaucrats in Sacramento blame everyone but themselves. 

The petroleum industry has invested tens of thousands of hours in commenting on CARB’s various ploys, but the bureaucrats refuse to listen to anything resembling criticism.  They are bolstered by the professional lobbyists who represent big-budget environmental groups and by venture capitalists who want the state to guarantee them big profits on alternative fuel and technology investments.  So we now have a package of unworkable regulations and a growing body of analysis that says, “Big Problem!”  Is CARB willing to listen?  Apparently not, since they vigorously defend their “cheaper than petroleum” and “trust us” mantra.

After all of this, I don’t trust CARB.  If the average Californian had any inkling of the price they pay because of the regulations adopted by this agency, they would dismantle it in a heartbeat.  But CARB has spread disinformation about their programs and cooked economic analysis that has been widely criticized.  Time and time again their initial estimates of cost to the regulated community and consumers are significantly under-projected. So the evidence to distrust their proclamations is plentiful and deep.

When CARB sits down and works with the regulated community in a constructive manner they can rightfully claim credit for helping to dramatically improve the state’s air quality.  But lately it has become a bureaucracy unwilling to listen to those who know how to make things work and is irrationally confident in its own brilliance.

CARB needs a climate change in their attitude and ability to work with those most impacted by their decisions.  If the governor or the Legislature doesn’t step in and assert some adult supervision, we all are going to be in a world of hurt.


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