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Prop. 23 is a money saver, Valero contends

The Texas oil company says its big Wilmington refinery would face prohibitive new costs, which it would have to pass on to consumers, if there's no relief from California's new emissions law.

October 31, 2010|By Margot Roosevelt, Los Angeles Times

The Valero oil refinery sprawls over 140 acres beside the Port of Long Beach, a treeless tangle of steel pipes, smokestacks, boilers and storage tanks fenced in by chain link and razor wire.

Austere and utilitarian, it seems an unlikely launching pad for a high-profile political revolt.

But the sign in front of the Wilmington refinery, in bold black and red letters, says: "On November 2d, Vote Yes on Prop 23."

Bill Klesse, chief executive of Valero Energy Corp., the nation's biggest independent refiner and the principal backer of Proposition 23, has a simple explanation for why his San Antonio-based company has contributed more than $5 million to push the ballot initiative to suspend California's ambitious global warming law.

"It's really an anti-fossil fuel law," he told Wall Street analysts on a recent conference call. And Valero's business is fossil fuels.

In the most closely watched environmental election fight in the country, national conservation groups, Silicon Valley moguls, Hollywood celebrities and California politicians have waged a scorched-earth campaign against Valero and its smaller ally Tesoro Corp., also headquartered in San Antonio, the initiative's second-biggest funder with more than $2 million contributed.

"The opposition has been able to characterize this issue as Texas oil companies …dirty companies and dirty polluters," Klesse said.

Critical service

Lost in the hubbub is a basic issue: What would it take for Valero to comply with the current law?

The 40-year-old Wilmington refinery supplies about 15% of Southern California's gasoline and asphalt, along with considerable amounts of diesel and jet fuel — a critical service to the economy.

To be sure, the boiling, cracking and chemical treating of those petroleum products comes at a price. For decades California authorities have regulated the plant's air pollution, water pollution and hazardous waste, including such health-damaging substances as nitrogen oxides and sulfur oxides, along with toxic soot known as particulates.

Now California is taking aim at the plant's annual emissions of 951,913 tons of carbon dioxide. In 2006, the state became the first in the country to enact a comprehensive global warming law, a measure that environmentalists see as a template for national policy.

The law, known as AB 32, or the Global Warming Solutions Act, would slash emissions of greenhouse gases to 1990 levels by 2020. Its regulations will lay out a timetable for energy-intensive industries such as refiners, utilities and cement plants to curb their output of carbon dioxide and other planet-heating gases — or pay millions of dollars in penalties.

Casting doubt

Colorless and odorless, greenhouse gases don't attack the lungs or hearts of local residents as traditional pollutants do. Rather they trap heat in the atmosphere, disrupting the global climate. The burning of fossil fuels is the main culprit behind global warming, according to leading scientific academies and organizations worldwide.

However, over the last decade, the oil industry has underwritten efforts to cast doubt on the science and fend off carbon curbs. If you want to control global warming, Klesse joked in a keynote speech to the 2008 National Petrochemical & Refiners Assn. convention, "hold your breath."

At the Wilmington plant, public affairs director Stephen Faichney likes to show visitors a video of Valero workers planting trees on Earth Day, donating Christmas stockings to children and sponsoring the Long Beach Symphony.

"We do thousands of hours of volunteering, but we are being demonized," he said.

Indeed, Gov. Arnold Schwarzenegger has stumped the state attacking the "black oil company hearts" and "self-serving greed" of Valero and Tesoro. Los Angeles Mayor Antonio Villaraigosa, citing "dirty tricks," urged: "Go home, Texas oil companies."

New regulations

Opponents released a report on the companies' environmental record titled "Toxic Twins," and environmentalists have staged scores of protests at Valero gas stations around the state.

Boasting the world's eighth-largest economy, California has an outsized impact. It has already begun adopting regulations under the act, including a mandate that one-third of the state's electricity come from solar, wind and other renewable sources within a decade, phasing out coal-fired electricity from out-of-state power plants.

Another rule would cut by 10% the carbon intensity of gasoline and other fuels. Carbon intensity is a measure of the amount of carbon emitted over a fuel's life cycle, including extraction, refining, transport and combustion. The new limit would discourage Valero and other refiners from using crude that comes from Canada's oil sands, extracted in an energy-intensive process, and ethanol that comes from plants using coal-fired power. Operating costs — and therefore gasoline prices — could increase.

"In a way, the low-carbon fuels [standard] is an electric car mandate," Klesse said.

Creating incentives

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