Chevron CEO John Watson has a problem. California is, well, “difficult.”
At a recent talk held at The Economic Club of Minnesota, Watson spoke out against one of the state’s environmental laws.
“California has one of the most onerous cap and trade laws that’s coming into effect,” Watson told a room full of investors, reporters, and club members, according to an article in the Star-Tribune. Responding to a question about state regulations, he mentioned delays on a project at Chevron’s Richmond refinery and referred to California as “a particularly difficult state.”
“We got the necessary approvals, (but) the court shut us down after a lawsuit,” Watson said, according to the Minneapolis-based newspaper.
“We’re almost 10 years in, and we haven’t upgraded the plants… Any business with any energy intensity about it will think twice before investing in California.”
Watson’s comments highlighted the growing tension between the state and major oil companies. Lawmakers designed Assembly Bill 32 — also known as cap and trade — to lower greenhouse gas emissions to 1990 levels.
But those leading the Richmond refinery’s modernization project, which was approved by the Richmond City Council earlier this year, say they aren’t worried about possible financial burdens.
“The [modernization] project was kind of right-sized,” said Chevron spokeswoman Nicole Barber during a recent tour of the Chevron plant. Despite a $1 billion price tag and a “shift of gasoline demand,” Barber said the refinery upgrade is “set up to make fuel for California” and that their “motivations are economic.”
Since 2013, Richmond’s Chevron refinery has been subject to cap and trade laws. Also referred to as the carbon tax, cap and trade gives every company emitting more than 25,000 metric tons of carbon dioxide a restricted amount of “allowances,” which are counted by the ton of greenhouse gas.
AB 32 incrementally limits the amount of allowances it gives out to companies, forcing them to either offset their greenhouse gas emissions or pay higher taxes.
Like the 13 other refineries in the state, Chevron Richmond receives allowances it can trade with other entities to save on operating costs. Over time, the price of these allowances rises and emissions must be lowered.
While crude oil distillation is the main source of the refinery’s revenue, the new bill will tax the consumption of gasoline and diesel fuels, and this has some advocacy groups worried.
The California Driver’s Alliance estimates that the state could lose up to 15,000 jobs and see gas prices rise up to 76 cents because of the new compliance period.
Chevron spokesman Braden Reddall said AB 32 will burden industry and consumers.
Reddall said the new compliance period will raise gas prices in the state, and added that the problem goes beyond the petroleum industry.
“Look at manufacturing in the state,” Reddall said. “It’s not just energy [producers]. It just so happens that Californians use a lot of petroleum.”
But the California Air Resources Board (ARB) stands by the cap and trade regulations.
“We don’t believe there will be a discernible increase in the price of gasoline,” Stanley Young, an ARB spokesman, wrote in an email. “These efforts will reduce our dependence on petroleum, help keep us from falling victim to its roller-coaster prices.”
Young said cap and trade legislation incentivizes fuel efficiency, public transit, and municipal green spaces.