Consumers may end up paying the price when pending state and federal air regulations hit California's energy industry, a pair of speakers warned at Tuesday's 2012 Oil & Gas Conference in Bakersfield.
The two speakers -- one a leading West Coast oil industry representative, the other the Central Valley's top air quality regulator -- said there is little chance that refiners and industry in general will be able to comply with rules pending at the state and federal levels.
As a result, steep new costs and far-reaching penalties may be inevitable unless policymakers can be persuaded to delay implementation of new pollution control measures, both speakers said.
The industry representative, Tupper Hull of the Western States Petroleum Association, took aim at a complementary set of regulations, the "cap and trade" carbon credits law known as AB32 and California's Low Carbon Fuel Standard. The regulations are intended to reduce carbon emissions by promoting widespread transition to cleaner forms of energy and having refineries and other facility operators pay for the right to emit pollutants.
The problem with the rules, Hull said, is that technology that would allow refineries to comply with the regulations is not yet commercially viable. That means that by 2017, he said, California refineries will bear nearly three-quarters of the cost of pollution credits.
"We don't think that's an equitable distribution," he said, adding that refiners will somehow have to recover new costs amounting to between 33 cents and $1.06 for every gallon of fuel they refine.
His proposal: Delay a state auction of pollution credits set for Nov. 14 until alternative technologies become practical.
The regulator who spoke against federal emissions rules, Seyed Sadredin, director of the San Joaquin Valley Air Pollution Control District, focused on what he called "unintended consequences" of the Clean Air Act. He said the act fines Central Valley motorists despite the region's significant progress in reducing emissions by stationary sources of air pollution.
New standards about to be issued by the U.S. Environmental Protection Agency will leave the valley with only two options, he said: Ban fossil fuel combustion in the Central Valley or allow only fuels with zero emissions -- neither of which he considers a viable alternative.
Sadredin specifically called for amending the Clean Air Act to allow additional time for compliance and development of better technology, or loosen the legislation to recognize that different fuels present different health threats.
Otherwise, he said, motorists across the region will continue to be penalized with higher vehicle registration costs.
"Put this on your radar," Sadredin said. "This is going to be tougher than AB32, and a lot sooner."
Both speakers' comments won praise from industry members gathered at Tuesday's conference, which discussed other, lesser threats, including public concerns over the safety of the oil field technique known as hydraulic fracturing.
Nick Ortiz, a WSPA representative based in Bakersfield, called air regulations a "major challenge" for local oil companies. Although refineries are expected to be hit more directly than oil producers, companies that drill for oil need refineries to buy their product, hence their shared interests.
Ortiz added that what comes of the new Clean Air Act standards could depend on what happens with next month's national elections.
Chevron Corp. spokeswoman Carla Musser said after the meeting that the industry has worked closely with the air pollution control district to reduce emissions using the "best available (pollution control) technology out there." She called it "amazing" that federal regulators have not fully recognized the progress being made locally.