California has a cap-and-trade system in place which is really just a way to place an additional tax on energy producers. That program keeps being extended every time it nears its expiration date. It was set to expire in 20130 but last year Democrats extended it for another 15 years to 2045. But the California Air Resources Board is also about to vote on changes to the program that could make it even more expensive for energy producers (aka “polluters”) to operate in the state.
This week, Chevron sent a letter to Gov. Newsom warning him that, if the new changes are approved, the cost of gas will spike and the ability of California’s remaining refineries to survive will be threatened. There are only 7 refineries left in California. Five others have closed in the past few years.
Chevron just sent a letter to California Governor Gavin Newsom and the California Air Resources Board warning them of deep concerns and strong opposition to the CARB- proposed amendments to the Cap-and-Invest (formerly cap and trade) regulation, that the state’s few remaining refineries can’t survive, and the California economy could be crippled.
“The proposed regulation will cripple the survivability of the state’s remaining refineries, which will result in California losing the entire industry to this misguided program. This regulation will increase transportation and aviation fuel prices for consumers. It will risk significant job losses, including many high-paying union jobs, while reducing funding for essential public services. It will upend California’s fuels market and threaten critical energy and national security assets.”
In the letter, Chevron President Andy Walz cautions that the price of gasoline will increase by more than a dollar a gallon by 2030 as a result of this regulatory change, as well as 536,770 petroleum industry jobs could be lost in the state if CARB’s proposal is authorized.
Walz continues:
The California energy industry’s economic, industrial, environmental, and national security benefits have been the foundation of a healthy, prosperous state and nation. Adversarial policies at local, regional and state levels have eroded that foundation. These proposed regulatory changes threaten to destroy it. Chevron urges policymakers and regulators to reconsider and revise the proposed regulation before it causes lasting and irreversible harm to California’s economy and energy security and broader vital American interests.
The full letter predicts that by 2030 the cost of the cap-and-trade tax would add $1.21 to every gallon of gas. In an interview with a local news outlet, Chevron Division President Andy Walz suggested his company and others might not survive, at least not in California.
In an interview with KCRA 3 on Thursday, Chevron’s President of Downstream, Midstream and Chemicals Division Andy Walz said the proposal ends up basically adding billions in costs to companies refining and producing fuel in-state. He said companies importing fuel from other countries would avoid the added costs.
“I know Chevron and my competitors are having trouble running a business in the state of California. If they add this burden of a tax on our refineries, I think it’s a matter of time. It’s not whether or not they’ll close, it’s when,” Walz said in the interview with KCRA 3.
When asked if Chevron is threatening to leave the state, Walz said the company has not yet made a decision. Walz said state leaders must get in front of the issue.
“I am extremely worried. I do think we have an emergency in the state of California. I think lawmakers need to take this seriously,” Walz said.
Another industry giant in California, PBF Energy, sent a similar letter to the state. PBF owns two of the remaining seven refineries in the state. Their letter points out that overseas oil companies are not hit with the cap-and-trade tax, only domestic companies.
The status quo of the C&I program will severely undermine the viability of in-state refining, with potentially devastating consequences for California’s fuel supply, economy, and workers. The Proposed Amendments will make the situation exponentially worse by increasing in-state refiners’ stationary payments. Before finalizing the proposed rule, we urge CARB to address the state’s gasoline supply-demand imbalance by revising the current C&I payment schedule and Proposed Amendments to put in-state refiners on equal regulatory footing with fuel importers.
Like Chevron, the suggestion here is that business in California could become “infeasible.”
The existing C&I regulations and Proposed Amendments will effectively drive in-state refiners out of business while importers are completely shielded from these costs. This is the central flaw in the current stationary source program. The Proposed Amendments as written will only exacerbate the cost imbalance between California’s refiners and importers.
If in-state refining becomes significantly impaired or infeasible, the catastrophe will go well beyond gasoline supply for consumers by also affecting military bases, jet fuel for California’s airports, marine fuel for ports, plus crude oil production in the Central Valley, all of which would impact thousands of direct and indirect jobs throughout the state.
The problem in California is that the state is broke and desperate for cash. The state expects a shortfall of $18 billion next year and an even larger shortfall the year after. This is why the state is looking to squeeze energy producers and billionaires for whatever it can get. Democrats are willing to risk killing the golden goose in the golden state because the only alternative is to cut spending, something no Democrat ever wants to consider.
But the long-term impact is likely to be negative. The cost of living in California is already the highest in the country (with the exception of Hawaii). Taxing billionaires and raising the price of gas by a dollar is only going to increase the cost of everything. At some point, the sky high prices will make more people regret being here which is not a good sign for the state’s future.
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