As this report was being prepared, no one could have predicted the context in which we are releasing it. California is the center of oil refining in the western U.S., with nearly 50% of its refining capacity in the five closely spaced oil refineries of Contra Costa and Solano counties. As the U.S. attempts, under failed federal leadership, to recover from the COVID-19 crisis, the International Energy Agency reports that any economic recovery that fails to step up to the urgency of addressing climate change will make it impossible to prevent climate catastrophe.
“Starting [a phase-down] sooner allows state climate targets to be met by cutting oil use more gradually, which makes transitions that protect workers and communities possible and climate goals feasible,” said Greg Karras, who authored the report for CBE.
Here are the report’s major conclusions and calls for action:
All paths to a livable climate involve refining much less oil.
Steep reductions in petroleum are necessary to meet our health goals.
Early action to decommission refining capacity is a critical component of the least-impact, most socially just, most feasible path to climate stabilization in California.
A planned, gradual phase-down gives us the time to develop sustainable alternatives for workers and communities economically dependent on oil.
Actions that limit refining in California can cut emissions across the petroleum fuel chain.
We must pair gradual reduction of refinery output with aggressive measures to insure clean mobility for all people.
Facilities such as refineries are major local emission centers for toxic co-pollutants alongside greenhouse gases, especially fine-sized particulate matter or soot (PM2.5). “From Richmond to Wilmington black and brown communities are on the frontlines of a toxic relationship with oil. This is a blueprint for organizing just transitions out of it,” said Andrés Soto, Richmond Organizer at CBE.
A path of gradual reductions, approximately 4-7% of refining capacity per year, will not even immediately affect California oil consumption. Californians already use significantly less refined fuels than produced by the refineries; refinery exports have grown to nearly a third of capacity. “Refineries around here pollute our communities even more by refining more oil to sell even more of their polluting fuels somewhere else, like black lives are invisible” said LaDonna Williams, a community leader who lives in South Vallejo.
A critical component of the report is addressing the challenges of transitioning workers and communities that are financially dependent upon the fossil fuel industry. Steve Garey, a retired oil refinery worker, former United Steel Workers union official and leader in the Blue-Green Alliance, spoke passionately about bringing workers and communities together to build a new economy.
California should begin gradually reducing output from its oil refineries in order to avoid climate catastrophe and to make the transition to clean energy as equitable as possible. That’s the conclusion of a major new report released July 6 by Communities for a Better Environment (CBE), endorsed by more than 40 environmental and social justice organizations.
While most people agree on the need to use less fossil fuel, many fear that requiring refineries to reduce production could lead to higher gasoline prices and a big economic hit for workers and communities that depend on refineries for income. Report-author Greg Karras responded, “If we start now, doing it gradually, it will give us the time to replace refinery-dependent economics.” The report calls for cutting production 4 to 7 percent a year, starting in 2021.
California has set targets for cutting carbon emissions between now and 2050: the state’s share of global cuts needed to keep temperature increases below catastrophic levels. Because the carbon that causes climate change builds up in the atmosphere, California has a carbon “budget”—the total amount it can emit from now until 2050. According to Decommissioning California Refineries, California will have to refine much less oil per year to avoid blowing through this carbon “budget” by about 2037.
“California is the biggest oil-refining center in Western North America,” Karras said. “Oil refined here emits more carbon than all other activities in the state combined.” Even if all other sources of carbon are reduced on schedule, Karras said, “we must refine much less oil if we hope to meet the state’s carbon limit.”
“We have to break free from our toxic relationship with oil before it takes us over a cliff,” Karras said. “When you’re in a car heading toward a cliff, it matters when you start putting on the brakes.”
The sooner we start, the more likely we are to escape the worst impacts of climate change.
The issue is not just climate, said Andres Soto of CBE. He pointed out that refinery pollution is concentrated in communities like Richmond, centers of racial and economic injustice.
“Only 20 percent of Richmond is Euro-American,” he said.
And the health consequences of having a refinery as a neighbor are severe.
Rodeo, another Contra Costa refinery town, “is in the 98th percentile for asthma,” said resident Maureen Brennan, and it has high rates of skin disease, autoimmune disease and cancer—all linked to refinery-generated pollution.
Retired refinery worker Steve Garey, past president of a United Steelworkers local in Washington state, said starting now to plan for reduced refinery production could actually benefit refinery workers, since “the movement away from fossil fuels and toward renewables is going to accelerate. It’s an economic reality. Renewables are cheaper than fossil fuel and getting cheaper all the time.”
Recently when the pandemic cut demand for gasoline, Garey said, the Marathon refinery in Martinez shut down, leaving the workers and community stranded.
The current drop in oil use, Karras said, gives us a once-in-a-lifetime opportunity to turn away from the cliff and build a cleaner and more equitable recovery.
Prices and Jobs
The Western States Petroleum Association (WSPA) said in a statement that requiring cuts in refinery production is a bad idea: “We believe we can support our people, our communities, our planet, and our shared prosperity without having to sacrifice one at the expense of the other. However, arbitrarily working to limit refining or production in the state will leave many Californians short of energy, without work and at a greater risk for displacement.”
The California State Building Trades Council recently joined in a partnership with WSPA to protect petroleum-industry jobs, although council President Robbie Hunter said he agrees that “dropping output in refineries is necessary. I believe we need to get rid of fossil fuels.” His unions have often lobbied for clean-energy programs like the Renewable Portfolio Standard, which requires electricity providers to use an increasing percentage of renewable energy.
But, like WSPA, Hunter opposes refinery production cuts, fearing an increase in gasoline prices that would, among other things, hurt building-trades workers such as his sons, who “sometimes drive 80 miles a day to job sites.” He argued for relying instead on programs to cut demand. “If the need goes down, I’m 100 percent in,” he said.
Contra Costa County Supervisor John Gioia represents a district that includes the Richmond Chevron refinery. He also sits on the California Air Resources Board (CARB) and the Bay Area Air Quality Management District. A longtime environmental champion, Gioia said he agrees with the report’s authors that “both demand and supply side strategies are necessary” to reduce petroleum use fast enough to meet climate goals. Last year the state legislature authorized studies to come up with strategies to reduce both supply and demand for greenhouse-gas-producing energy.
Gioia pointed to several new CARB regulations to reduce petroleum use, including a recent first-in-the-nation rule that sets a schedule for replacing diesel with electric trucks, as well as a schedule passed last year for switching to electric buses. But he said, “we have to be really thoughtful about the impact [of climate measures] on the hardest-hit communities. It’s the lowest-income Californians, communities of color, who are the most impacted by rising fuel costs and don’t always have access to public transportation.”
Karras responded to these concerns by pointing out that, as demand for petroleum products in California has fallen, refineries have not reduced their output but, instead, started exporting more of their product—now at least 20 percent and rising. So production could be cut by 20 percent or more without reducing the amount available to Californians. And, he added, “It’s a pure injustice for Black and Brown people in fence-line communities” to suffer pollution “so refineries can manufacture fuel that Californians don’t need, to export our oil dependency to other countries.”
Union leaders don’t buy that argument.
“As long as there’s a market for the product somewhere, American workers should produce it,” Garey said. For members of his union, cuts in refinery production mean “losing the best job they ever had.” In addition, many workers in construction trades depend on refineries for jobs. And, Garey said, “this is a community-wide issue.”
Refineries contribute a big share of the taxes communities rely on. And there’s what economists call a “multiplier” effect: every high-paying job creates seven to 10 other jobs providing the goods and services that refinery workers can afford to buy.
Start Planning Now
According to the Decommissioning California Refineries report, those very economic facts are the reason why it’s important to start immediately creating ambitious programs for supporting workers and communities in the switch to a clean-energy economy.
Doing that “will take state, local, and county action as well as a national plan,” said Soto of CBE. And, he added, the plan must be based on “justice for workers and the people who have paid the heaviest price of having polluters in their communities.”
Carol Zabin, who heads the Green Economy Program at the UC Labor Center, agreed. It will be necessary to “use a lot of levers of government, from direct public investment to business incentives to training and education infrastructure,” she said.
Ramping up efforts to create good jobs in a clean-energy economy is a goal environmentalists and labor advocates agree on.
“The big problem is that there are not enough other good jobs for people without a college education,” Zabin said.
Hunter, of the Building Trades Council, said his unions have been pushing for public programs that create good jobs while reducing demand for petroleum: building solar and wind energy, massive expansion and electrification of public transit, high-speed rail, housing near transit.
Zabin agreed with Karras that each community needs to “figure out in an intimate local setting” how to shift from economic dependence on refineries. “We have to plan locally with state and federal support,” Karras said.
“This is a process that requires community-wide participation,” Soto added. Workers, refinery community residents, and environmental organizations should be involved in the planning, Garey said. They all “need each other as allies – we need the biggest ‘we’ we can get.”
Supervisor Gioia said Contra Costa County should “start now having study sessions and community forums to lay out pathways for this thing that we have to do to save the planet.” He agreed that workers and residents should be part of the planning process and reported that Contra Costa has already adopted “a policy to have a more inclusive planning process—the community has to have a voice.”
“We need strategies to make California the manufacturing center of the new economy,” Gioia added. He pointed to a new factory in Los Angeles County—with good, union jobs—making the electric buses needed for the county’s clean-transportation plan.
But not all investments in clean energy produce good, family-supporting jobs, Zabin said. “We need labor standards on all industries affected by climate policy.” There are none, she pointed out, in California’s program for building electric-vehicle charging stations. And most energy-efficiency projects “have gone low-road.”
When the Air Resources Board was creating standards for energy-efficiency work, she said, the State Building Trades Council pushed for them to include labor standards. Zabin herself submitted two reports calling for the same thing. For environmental programs to build a coalition with labor, she said, “we should put conditions on the $1.5 billion a year we spend on energy efficiency.” But CARB rejected these proposals. “It’s a question of political will,” Zabin said. Government could also create good jobs in other areas, she added, such as rebuilding infrastructure—a green New Deal.
Committing Significant Revenue
But economic development programs are not enough to meet the needs of refinery workers, Garey said. “We need to commit significant revenue, enough to support their income for an appropriate time.” He pointed to a program spelled out in an initiative that narrowly lost in his state of Washington, calling for “income insurance” for up to five years for workers who lost their jobs because of the switch from fossil fuel, as well as health insurance, a path to retirement and support for job retraining.
Building a stronger “social safety net” is necessary, not only for displaced petroleum workers, but for everyone, Karras argues: “The average gig-worker job doesn’t pay enough for rent or mortgage, health care, college.”
Especially in refinery communities like Contra Costa, Gioia said, “we need to look at more robust training programs in our community colleges—opportunities for a new generation to enter trades in a new industry.” At the same time, he added, it might be necessary to “subsidize early retirement for workers late in their career.”
The nonprofit think tank Oil Change International calls for a similar inclusive planning process on the state level, a “Statewide Just Transition Task Force—as has been done in Scotland and in Canada, for example—to facilitate the process of social dialogue and planning between employers, workers, unions, frontline communities and organizations, and local and state agencies.” [The Sky’s the Limit California, p. 10]
Calls for these ambitious programs raise the obvious question of where the money will come from. Oil Change International says the state should charge oil companies a “just transition fee based on the value of their oil production.” Karras suggests a similar principle, which could also be applied on a local or state level: “Make the polluters pay.” He pointed to a federal program that required nuclear power plants to “pay up front into a trust fund to clean up the whole mess—environmental and economic” that they would leave behind when they close.
The important thing—the reason for issuing this report—Karras said, is to “start the conversation. To say, ‘we have to do this,’ and start talking about it. We will have to figure out how.”
By Annie Notthoff, December 17, 2015 | Annie Notthoff is director of the Natural Resources Defense Council’s California advocacy program.
The spending and tax policy agreement Congress and the White House have reached to keep the government funded and running includes important wins for health and the environment.
But there’s good news to report, only because of the Herculean efforts of House Minority Leader Nancy Pelosi, D-San Francisco, Senate Minority Leader Harry Reid, D-Nev., and the White House, who worked tirelessly to block nearly all of the dozens and dozens of proposals Republican leaders were pushing.
Those proposals would have blocked action on climate, clean air, clean water, land preservation and wildlife protection and stripped key programs of needed resources. The Republican leaders’ proposals were the clearest expression yet of their “just say no” approach to environmental policy. They literally have no plan, except to block every movement forward on problems that threaten our health and our planet.
The worst aspect of the budget agreement is another clear indication of Republican leaders’ misplaced priorities — they exacted an end to the decades-long ban on sending U.S. crude oil overseas in this bill, in return for giving up on key elements of their antienvironment agenda.
Senate Majority Leader Mitch McConnell, R-Ky., made that give-away to the oil industry one of his top priorities. It will mean increased oil drilling in the U.S., with all the attendant dangers, with the benefits going to oil companies and overseas purchasers. That won’t help the American public, or the climate. It’s simply an undeserved gift to Big Oil.
In good news, the agreement extends tax credits for wind and solar energy for five years, which will give those industries long-sought certainty about their financing.
Wind and solar will continue to grow by leaps and bounds, helping domestic industry, reducing carbon pollution and making the U.S. less vulnerable to the ups and downs of fossil fuel prices.
Democratic leaders deserve all our thanks for what they were able to keep out of the budget deal. Gone are the vast majority of obstacles Republican leaders tried to throw in the way of environmental protection. Recall for a moment the 100 or more antienvironmental provisions Republican leaders tried to attach to these spending bills. Those included efforts to:
• Block the Environmental Protection Agency’s Clean Power Plan, which sets the first-ever limits on carbon pollution from power plants — our best available tool to combat dangerous climate change.
• Roll back the Obama Administration’s Clean Water Rule, which would restore protections for the potential drinking water supplies of 1 in 3 Americans.
• Repeal the EPA’s newly issued health standards to protect us from smog.
• Bar the Interior Department from protecting our streams from the pollution generated by mountaintop removal during coal mining.
• Strip Endangered Species Act protections for gray wolves, the greater sage grouse, elephants, the Sonoran Desert tortoise, and other threatened animals.
• Force approval of the proposed Keystone XL tar sands oil pipeline, which President Obama already has rejected.
There’s more work ahead to protect the environment, starting with eliminating the threat of oil drilling in the Arctic and off the Atlantic Coast.
But despite the efforts of Republican congressional leaders to hold the public hostage and bring us to the brink of another government shutdown, a budget deal has emerged that protects environmental progress.
Most of the easily extracted oil deposits are long gone. What’s left are high-cost, high-risk long shots such as the Alberta tar sands, deep-water reservoirs off Brazil, and drilling the high Arctic. Companies hoping to profit from the last dregs of the petroleum age need to convince their investors to part with massive amounts of capital in hopes of competitive returns often decades down the road.
Billions have already fled the Alberta oil sands in the last year as the global price of oil collapsed from over $100 per barrel to below $40. Shell has just called a halt to its Carmon Creek project in Northern Alberta, writing off $2bn in booked assets and 418 million barrels of bitumen reserves. A barrel of bitumen will release about 480kg of carbon dioxide from extraction, refining, transport and combustion. This head office write-down means that 200m tonnes of carbon will not be released into the atmosphere.
Two other tar sands projects were also shelved this year with reserves of about 3bn barrels. If these investments stay dead the world will avoid another 1.6tn tonnes of dangerous carbon emissions. Together the cancellation of these three projects alone amount to the equivalent of taking more than 14m cars off the road for the next 25 years.
Its message to investors is simple: the world must limit additional emissions to below 900 gigatons to avoid potentially catastrophic climate consequences – and 40% of this future carbon budget – about 360 gigatons – is projected to come from the oil sector. Anything more than that must stay in the ground – the so-called unburnable carbon.
And what’s the price of oil that could save to world? Anything below $75 a barrel of Brent crude means that companies cannot profitably extract more than 360 gigatons of the world’s remaining reserves – no messy policy solutions required.
Just last year the price of Brent crude was about $110 a barrel, a price that would gainfully produce about 500 gigatons of carbon emissions by 2050. Now it is less than $50, which would only produce 180 gigatons over the same period. If prices stay where they are, the world will avoid some 320bn tonnes of carbon emissions by 2050 in precluded production from uneconomic oil fields.
To put this in perspective, that is 25 times larger than reductions the Kyoto protocol was supposed to achieve if it had worked (it didn’t), and 180 gigatons below the oil emissions limit scientists say we need to avoid a world with more than two degrees of warming. Economic turmoil aside, the global commodities market just served up massive progress on an issue in desperate need of some good news.
Carbon Tracker recently revised its calculations to include the turmoil in the oil market, but the basic correlation is the same: lower fossil fuel prices devastate the economics of future extraction.
Seen through this lens, a key measure of our success in controlling carbon emissions should be keeping commodity prices of fossil fuels low. And while the main driver of the current slump in prices is the current glut of supply, it’s important to realise that almost every policy intervention to avert climate disaster is directly or indirectly aimed at lowering the price or profitability of fossil fuels such as oil and coal.
Efficiency and conservation incentives reduce demand, as do vehicle emission standards and investing in public transit. Carbon pricing means that fossil fuel companies can no longer use the atmosphere as a free dumping ground for CO2, so also lowering profitability.
But doesn’t cheap gas mean that people just use more of it? Not really. While there is a weak economic link between declining prices and increasing consumption, key producers like Saudi Arabia are in fact fretting that slowing growth in Asian markets and already peaked demand in developed countries will lead to a long-term decline in the world’s appetite for oil.
I dearly hope that world leaders can somehow negotiate transformative change. But perhaps the best they can do is nudge economic indicators like crude prices in the right direction and get out of the way. The unstoppable forces of the global marketplace will hopefully do the rest.