Jerry Brown's Cap-and-Trade Bill Would Exempt Refineries From Air Pollution Regulation

Documents obtained by Capitol Watchdog reveal that Governor Jerry Brown is shopping cap and trade bill language directly from Big Oil's Power Point playbook to exempt refineries from air pollution regulation.

Brown has handed Big Oil a pen to rewrite the law so that it protects refiners from making deep cuts to climate-warming emissions. The legislation blocks powerful Air Districts in the Bay Area and Los Angeles Basin from setting tough limits on emissions, like requiring refineries to install pollution control equipment.

Instead, the legislation hands regulation of refineries to the Air Resources Board, and ties the ARB's hands by prohibiting it from crafting meaningful greenhouse gas reduction goals. The ARB could use the cap and trade system to regulate refineries, but be prohibited from regulating in any other way.

The Bay Area Air Quality Management District thinks stripping local Air Districts of authority and giving the ARB anemic oversight in their place is a bad idea, according to a document Capitol Watchdog just uncovered. A factsheet Bay Area air regulators are circulating to legislative staffers is titled: "Local Air Districts must retain the authority to regulate GHGs." The document vehemently opposes Governor Brown's plan to shift authority to the ARB to regulate refineries under cap and trade, saying Calfiornia refinery emissions "have not significantly decreased under Cap-and-Trade."

If the legislation introduced takes the form of drafts the Governor and his top aide Nancy McFadden are sharing with legislative leaders, it would put the lie to Governor Brown's image as a climate change champion.

Big Oil fought the cap and trade program tooth and nail. Oil refiners Tesoro and Valero were the main funders of Prop 23 in 2010, the referendum to repeal AB 32--the 2006 law that established the cap and trade system that dispenses pollution allowances sold or traded to control emissions. Californians soundly defeated refiners at the ballot box. 

Brown would snatch defeat from the jaws of victory over Big Oil if this plan goes forward.

The draft bill language is identical to provisions of a Western States Petroleum Association wish list produced by Big Oil lobbyists Latham and Watkins in a Power Point presentation.

The Latham and Watkins Power Point handed out to lawmakers is titled: “10 Recommendations to Fight Climate Change in California Effectively, Equitably, and Efficiently.”

Except the recommendations are not effective, equitable, or efficient. 

The biggest giveaway to Big Oil in Brown's plan is Ask Number 5 from WSPA's powerpoint: "Give ARB exclusive jurisdiction over GHG emissions in the State."

The governor's language titled No Refinery Measure and No Local Air District Regulation of GHG Emissions does what Big Oil recommends, but eviscerates both ARB's and local Air Districts' ability to do what they think is necessary to get to the goal of cutting greenhouse gas emissions 40 perent below1990 levels.The draft language would: “Grant ARB exclusive jurisdiction over GHG emissions and prohibit ARB and other agencies from imposing new GHG emissions reduction obligations.”

Then, the draft language clarifies that cap and trade will be ARB's only method of regulating refineries: “The state board shall designate the market-based compliance mechanism...as the rule for petroleum refineries and oil and gas production facilities to achieve their greenhouse gas emissions reductions.” Moreover, Big Oil writes the rules for ARB, which guarantee that the cap and trade program will remain cheaper than installing the pollution control equipment that would be necessary to really meet the goal.

Big Oil would get the last laugh on the two most powerful state regulators of refineries, the Bay Area Air Quality Management District and the South Coast Air Quality Management District. It has found a way to cut them off at the knees just when they were taking direct action to set strict limits on refinery emissions.

The South Coast Air Quality Management District recently decided to sunset an ineffective 1993 trading program to regulate nitrous oxide, a greenhouse gas, in favor of tough emissions limits that would have ultimately required installation of anti-pollution equipment, according to the Los Angeles Times. The old program had saved refineries up to $1 billion. The Bay Area District was about to make a similar move, but had delayed their vote on their plan to create the nation's first greenhouse gas limits for refineries.

Asks Numbers 6 and 8 in Big Oil's power point say a "price cap" on emissions and expanded use of "offsets" within California will protect consumers from "uncontrollable price spikes" and "contain" the cost of cap and trade to the state economy.

Another piece of Brown's draft language grants the Asks. It proposes price caps to hold down the price of emissions--the opposite of the desired economic signal--and promotes more "offset" projects in California. The real effects of "offset" investments in projects, like forest protection, are notoriously hard to measure and don't cut pollution in communities where emissions are generated.

Big Oil's Ask Number 5, on the subject of "Transparency," proposes "Reporting on GHG and criteria pollutant emissions of large stationary sources." A third piece of draft language establishes "monitoring” of toxic air pollutants in low-income communities--but does not direct polluters to pay for the program.

Once introduced, the Governor's bill would supersede other bills in the Senate and Assembly aimed at eliminating loopholes in the existing cap and trade program such as free allowance giveaways, and shielding lower-income communities of color from continued deadly emissions.

This isn't the first time that Brown has championed the oil industry as he galavants around the globe as an anti-climate change crusader.

This outrageous giveaway may be Brown's Thank You to Big Oil for their contributions that helped him twice win the Governorship, pass his Prop 30 tax-raising measure that crowned him a Fiscal Wizard, and generate hundreds of millions of dollars for his coveted High Speed Rail project. A whopping $800 million of the $1.2 billion the cap and trade program has raised was plowed into Brown's Rail project. Brown wants that spigot to stay open. 

Big Oil doesn't care how Brown uses the money as long as they can continue to pay less to pollute than really do something about it. So, far they have gotten what they want. Researchers from the University of Southern California and the University of California at Berkeley recently found that California's cap and trade program has not cut greenhouse gas emissions. In fact, in-state emissions from high greenhouse gas emitting industries, such as refineries and power plants, have gone up.

This way forward gives Jerry Brown the opportunity to tout himself as the leader who pushed through cap and trade as a way to save the world from climate change, cementing his legacy as an environmentalist while financing other big infrastructure projects that hark back to the days of his father, "Pat" Brown. By the time this cap and trade program goes into effect in 2021, Governor Brown will be history.

If Big Oil's blueprint goes through at Brown's behest, this law will be the biggest pig in lipstick the public ever saw.

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