BP's refinery in Carson, which Tesoro has agreed to buy, is the third-biggest… (Andrew Gombert / EPA )
Texas oil company Tesoro is going Californian in a big way. Is it getting hot in here?
For Californians of an environmental bent (which describes most Californians), the name Tesoro does not conjure happy memories. In 2010, the company teamed with a bigger San Antonio-based oil company, Valero, to put Proposition 23 on the state ballot. The measure was a highly cynical attempt to pretend that the state's unemployment problem, which was and is a function of the nation's housing and financial crises, was actually related to AB 32, California's pioneering effort to reduce greenhouse gas emissions to 1990 levels by 2020. It would have suspended enforcement of clean-air rules until the state's unemployment rate hit 5.5%, which is unlikely to happen for years -- meaning that, essentially, Proposition 23 would have killed AB 32.
In the end, Valero and Tesoro were outspent 3 to 1 by opponents of the measure, led by venture capitalists with investments in California's clean-energy industry, and Proposition 23 was crushed at the polls. The loss, apparently, didn't sour Tesoro on California, where it has agreed to spend $2.5 billion to buy a sprawling Carson refinery and the Arco brand from BP.
The deal is raising red flags from consumer advocates, who note that more than half of California's gasoline production capacity would be owned by just two companies if the deal goes through: Tesoro and Chevron Corp. The lack of competition could mean even more inflation of California's already stratospheric gas prices. Moreover, with Tesoro taking over local Arco stations, it's not clear whether the company would continue BP's policy of offering lower-than-average prices.
Meanwhile, based on past history, California environmentalists may have at least as much reason to worry about the deal as consumer advocates.
The BP refinery that Tesoro aims to buy is, according to the California Air Resources Board, the third biggest emitter of greenhouse gases in the state, after the Chevron refinery in Richmond that was recently shuttered by a fire and a Shell refinery in Contra Costa. Tesoro CEO Greg Goff told investors that, by merging the BP refinery with an existing Tesoro refinery in Wilmington that shares a fence line with it, the company would not only save $250 million a year by 2015, it would reduce overall emissions from the two plants and make them efficient enough to meet California's increasingly stringent greenhouse gas standards.
What he didn't say is that Tesoro, already a force to be reckoned with in California politics, will soon have a stranglehold on the state's refining business as well as becoming a prime player in retail gasoline sales. That would make this politically activist Texas company among the most powerful pollution advocates in the Golden State. Proposition 23 may turn out to have been just a warm-up.
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