Steyer takes on oil interests in 'donnybrook' over motor fuels in cap and trade

Billionaire activist Tom Steyer is challenging oil industry-led efforts to keep motor fuels out of California's program to cut carbon emissions, ratcheting up an already heated battle.

Steyer accused oil companies yesterday of trying "to avoid paying their fair share" as they push to stop expansion of the cap-and-trade program for greenhouse gas pollution. Come January, it's slated to wrap in the transportation sector, forcing 14 refineries to start buying permits for emissions tied to in-state gasoline and diesel sales.

Oil companies and their supporters say the regulation will trigger pump price increases that hurt consumers and the economy. Steyer questions that argument.

"These companies are threatening to raise prices for consumers at the gas pump in order to get out of the cap-and-trade system and protect their profits," Steyer said in a blog post on his NextGen Climate website. "It's the same menu of tired scare tactics they used four years ago -- and it's still a bunch of baloney. Any price hikes would happen for one reason alone: because the oil industry chooses to increase them, rather than pay their fair share."

Steyer on Tuesday, following a meeting with health and environmental groups in Los Angeles, told the Los Angeles Times that he would "spend what it takes to win" the fight to protect the state's climate law. He didn't specify a dollar amount, and an aide yesterday didn't have additional information.


Steyer's involvement in the fuels fight means a rematch of a battle from 2010. He and former Secretary of State George Shultz (R) that year led the effort to defeat California's Proposition 23. That oil industry-funded measure would have stopped implementation of A.B. 32.

Groups wanting to keep fuels out of cap and trade lashed out at Steyer yesterday.

"He's a hedge fund billionaire," said Sabrina Lockhart, spokeswoman for Californians Against Higher Oil Taxes. "He did profit from oil and coal, and now he's pushing policies that will hurt Californians who can least afford these price hikes."

Oil companies and their allies have launched a number of groups, websites and campaigns directed at stopping fuels as part of cap and trade. One, "Fed Up at the Pump," on its website asks people, "Ready for the Jan. 2015 gas price hike? A 16-76 cent per gallon gas tax is on its way. Help us tell Governor Brown we are Fed Up at the Pump."

Earlier this month oil interests and their backers had some success when state Assemblyman Henry Perea (D) stripped text out of one of his bills that had been stalled in committee and replaced it with language that would put a three-year moratorium on adding fuels to cap and trade (ClimateWire, July 7).

Perea's A.B. 69 also states that "before including transportation fuels in a market-based compliance mechanism, the State Air Resources Board must ensure that the state's motorists, families, and small businesses are prepared for this carbon price signal with sufficient notice, information, and protection from certain and volatile cost increases for their transportation fuels."

Perea's bill "clearly raised this higher on the radar screen," said Dan Lashof, chief operating officer at NextGen Climate America, a policy organization founded by Steyer.

"To the extent that elected officials are afraid of the political clout of the oil industry, it's certainly helpful to have a counterweight to that," Lashof said of Steyer's involvement.

He had not talked to Steyer yesterday, however, and did not yet know his exact plans going forward.

'Sticker shock' for drivers?

With Steyer's involvement and his wealth going up against the resources of the oil industry, the fight over fuels and cap and trade likely will be raucous, said Larry Gerston, professor emeritus of political science at San Jose State University.

"This could be quite the donnybrook," Gerston said.

Oil companies and their supporters could have an advantage, Gerston said, as the idea of higher gas prices is easier to understand than the concept of carbon pollution and its effects on health and the environment.

"Already gas in California is 30 to 40 cents above the national average, and now someone sticks you with another 12-15-20 cents" per gallon, Gerston said. "Do I think that's going to be sticker shock for a lot of people? Yeah I do."

"Steyer's largesse will certainly play a role in discouraging the passage of [Perea's] legislation," Gerston added. "It all depends on how many legislators feel their jobs are at stake."

Gasoline prices are likely to rise 10 to 12 cents per gallon when motor fuels become part of cap and trade, a state-commissioned analysis released earlier this month said. It also projected that consumers will adjust to the increase (ClimateWire, July 8).

California consumers guzzle about 17 billion gallons of fuels annually.

Mary Nichols, chairwoman of the Air Resources Board (ARB), in a letter to Perea last week downplayed the significance of pump price increases.

"Any volatility resulting from Cap-and-Trade will be far less than California's historic experience," Nichols said. "I would point out that since January 2011, there have been 23 separate instances where retail gasoline prices fluctuated by 10 cents or more per gallon in a week. In fact, so far this year, California's gasoline prices have varied by more than 60 cents a gallon."

A statewide poll earlier this month found that Californians overwhelmingly favor state laws aimed at limiting climate change. But it also revealed that support would notably drop if the rules caused gas prices to rise (ClimateWire, July 24).

The Public Policy Institute of California (PPIC) survey also uncovered that a large segment of voters aren't very knowledgeable about cap and trade, with 55 percent saying that they had heard "nothing at all" about the system. An additional 32 percent said they had heard a little, and 13 percent answered that they had heard a lot about the policy.

Ads created

The groups fighting to keep fuels out of cap and trade are rolling out a number of efforts to persuade voters over to their side.

The California Independent Oil Marketers Association (CIOMA), a fuel wholesaler, is reaching out to its customers in the state's Central Valley, said Jay McKeeman, the group's vice president of government relations. CIOMA is asking businesses to put up signs announcing "Fed Up at the Pump" and asking people to go to the group's website. The signs alert people that a fuel increase is coming "in the near future," he said.

"We would like to see an open dialogue on a flat fee" instead of adding fuels to cap and trade, McKeeman said. That would be a tax that was added to the fuel price, he said, so that "everybody sees it, everybody knows what it is."

Another group, the California Drivers Alliance, has produced video advertisements against the "oil tax" that now appear on YouTube. A spokesman for the Western States Petroleum Association, which in part funds the California Drivers Alliance, did not immediately respond to an inquiry about whether those spots would be put on television.

Lashof with NextGen Climate America said that groups supporting fuels in cap and trade "have to counter the misinformation that the oil industry is putting out" and "remind people that the reason that California adopted A.B. 32 to begin with ... is because this bill creates health and welfare benefits for California and that it's essential to move forward with it."

"At the end of day, the idea that oil companies that are among the most profitable in the world are concerned about consumers, I just don't think is very credible," Lashof added.

Susan Frank, director of the California Business Alliance for a Green Economy, said she welcomed any help Steyer is willing to offer, given the resources of the oil industry.

"The money that this array of front groups are spending right now to kill A.B. 32 is going to be in the tens of millions [of dollars] by the time they're done," Frank said. "This is an all-out assault on clean energy standards."

Lockhart did not respond to a question about whether the groups would be spending in the tens of millions of dollars. She said, however, that the interest groups have members beyond oil companies. A list of supporters of Californians Against Higher Oil Taxes showed that it included the Stanislaus County Farm Bureau, the city of Bakersfield, the Hispanic Chamber of Commerce San Francisco, the California Chamber of Commerce and the California Business Roundtable.

Twitter: @annecmulkern | Email:

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