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McClatchy-Tribune  06/30/2014 9:00 AM ET
Industry groups stir opposition to a cap-and-trade expansion they say will lead to higher gas prices [The Sacramento Bee :: ]

June 30--In a conference call with oil industry analysts in late 2012, Mike Wirth, a Chevron Corp. executive, took stock of California's greenhouse gas reduction policies and warned that the state's plan to expand its controversial cap-and-trade program to vehicle fuels in 2015 would result in higher prices at the pump.

"If you get fuels under the cap and trade, which is anticipated out towards the middle of this decade, the costs explode and that is where you go from cost in the hundreds of millions of dollars a year to costs in the billions of dollars a year," Wirth said, according to a Thomson Reuters transcript of the call.

Chevron would not absorb the expense, Wirth said, and would pass the cost "into the price of the product."

Chevron's concerns were expressed by other oil companies at the time, part of a years-old debate between business interests and environmentalists over cap and trade. The carbon market is the centerpiece of Assembly Bill 32, the landmark greenhouse gas reduction legislation passed in 2006.

But now, with the heightened sensitivity of an election year and the expansion of the carbon program looming, critics are redoubling their opposition. The California Independent Oil Marketers Association, an industry group, has organized Fed Up at the Pump, which describes itself as a "grass-roots coalition of consumers, businesses and advocates." Neel Kashkari, the Republican candidate for governor, is criticizing Gov. Jerry Brown for what he calls a "hidden" tax on gas, and 40 state lawmakers, including 16 Assembly Democrats, have formally urged the Brown administration to back off the regulation.

The Western States Petroleum Association, which represents oil interests influential at the Capitol, has said it could cost oil companies 12 cents or more a gallon to buy carbon credits for the fuel they sell in California each year.

"If this goes through as planned, in places like the Valley and other communities where money's tight, another 15 cents a gallon?" said Henry Perea, the Fresno assemblyman who wrote a letter signed by 16 Democrats this month to Mary Nichols, chairwoman of the California Air Resources Board. "There's not a lot of public transportation in Fresno. ... We drive, we rely on our cars here, and for gas to go up another 15 cents a gallon is a major hit."

The Brown administration expects to generate about $550 million in proceeds from cap-and-trade auctions in the upcoming budget year, with funds directed to high-speed rail and other transportation projects, affordable housing and programs designed to reduce emissions. Of the Democrats who signed the letter urging Brown to hold off on the regulation, all but one, Rudy Salas of Bakersfield, voted in favor of the cap-and-trade spending plan in budget-related legislation this month.

"It sounds like in an election year everyone is looking for some political cover on tough issues," said Robin Swanson, a Democratic political consultant. "If gas prices go up in the summer, no one wants to be held accountable for that; no one wants to be left holding that bag."

Patrick DeHaan, senior petroleum analyst for price tracker, estimated the expansion of California's cap-and-trade program could result in a 10- to 20-cent-per-gallon increase in fuel prices.

"The producers are going to say that prices are going to go soaring, and the environmentalists say, "Oh, its no big deal,'" DeHaan said. "I think the truth lies somewhere in the middle. ... It's not the doom and gloom that the oil lobby would have you believe, and it's not nothing, like the environmentalists would have you believe. It certainly will be felt by motorists."

Brown, a third-term Democrat, is unwavering. Under the existing cap-and-trade program, big industrial polluters have been required to reduce emissions or buy allowances since 2012, and Stanley Young, a spokesman for the Air Resources Board, said many companies coming under the cap in January


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