Tag Archives: Los Angeles County Economic Development Corporation

California Gov. Brown: keep the oil in the ground

Repost from the San Francisco Chronicle
[Editor – This report signals a highly significant shift in the discussions surrounding climate change and the oil industry: cut demand … or cut supply?   A must read!  – RS]

Gov. Brown wants to keep oil in the ground. But whose oil?

By David R. Baker, July 26, 2015 8:16pm
California Gov. Jerry Brown, right,  delivers his speech flanked by the head of the pontifical academy of Science, Bishop Marcelo Sanchez Sorondo, during  a conference on Modern Slavery and Climate Change in the Casina Pio IV the Vatican, Wednesday, July 22, 2015.  Dozens of environmentally friendly mayors from around the world are meeting at the Vatican this week to bask in the star power of eco-Pope Francis and commit to reducing global warming and helping the urban poor deal with its effects. (AP Photo/Alessandra Tarantino) Photo: Alessandra Tarantino, Associated Press
California Gov. Jerry Brown, right, delivers his speech during a conference on Modern Slavery and Climate Change in the Casina Pio IV the Vatican, Wednesday, July 22, 2015. (AP Photo/Alessandra Tarantino)

Even the greenest, most eco-friendly politicians rarely utter the words Gov. Jerry Brown spoke at the Vatican’s climate change symposium last week.

To prevent the worst effects of global warming, one-third of the world’s known oil reserves must remain in the ground, Brown told the gathering of government officials from around the world. The same goes for 50 percent of natural gas reserves and 90 percent of coal.

“Now that is a revolution,” Brown said. “That is going to take a call to arms.”

It’s an idea widely embraced among environmentalists and climate scientists. Burn all the world’s known fossil fuel supplies — the ones already discovered by energy companies — and the atmosphere would warm to truly catastrophic levels. Never mind hunting for more oil.

But it’s a concept few politicians will touch. That’s because it raises a question no one wants to answer: Whose oil has to stay put?

“They’ve all got their own oil,” said environmental activist and author Bill McKibben, who first popularized the issue with a widely read 2012 article in Rolling Stone. “Recognizing that you’ve got to leave your own oil — and not somebody else’s — in the ground is the next step.”

Take California.

No state has done more to fight global warming. By 2020, under state law, one-third of California’s electricity must come from the sun, the wind and other renewable sources. Brown wants 50 percent renewable power by 2030 and has called for slashing the state’s oil use in half by the same year.

But he has shown no interest in cutting the state’s oil production. He has touted the economic potential of California’s vast Monterey Shale formation, whose oil reserves drillers are still trying to tap. And he has steadfastly refused calls from within his own party to ban fracking.

“If we reduce our oil drilling in California by a few percent, which a ban on fracking would do, we’ll import more oil by train or by boat,” Brown told “Meet the Press.” “That doesn’t make a lot of sense.”

California remains America’s third-largest oil producing state, behind Texas and North Dakota. The industry directly employs 184,100 Californians, helps support an estimated 271,840 other jobs and yields $21.2 billion in state and local taxes each year, according to the Los Angeles County Economic Development Corporation.

‘Phasing out oil drilling’

Any governor, no matter how environmentally minded, would have a hard time turning that down. Even if many environmentalists wish Brown would.

“Just like we have a plan for increasing renewables, we need a plan for phasing out oil drilling in California,” said Dan Jacobson, state director for Environment California.

It’s difficult for politicians to even talk about something as stark as putting limits on pumping oil, he said.

“Solar and wind and electric cars are really hopeful things, whereas keeping oil in the ground sounds more like doomsday,” Jacobson said.

And yet, Jacobson, McKibben and now apparently Brown are convinced that most fossil fuel reserves must never be used.

The percentages Brown cited come from a study published this year in the scientific journal Nature. The researchers calculated that in order to keep average global temperatures from rising more than 2 degrees Celsius — 3.6 degrees Fahrenheit — above preindustrial levels, the world’s economy can pump no more than 1,100 gigatons of carbon dioxide into the atmosphere between 2011 and 2050. Burning the world’s known fossil fuel reserves would produce roughly three times that amount, they wrote.

Most governments pursing climate-change policies have agreed to aim for a 2-degree Celsius warming limit, although many scientists consider that dangerously high. So far, global temperatures have warmed 0.8 degrees Celsius from preindustrial times.

“The unabated use of all current fossil fuel reserves is incompatible with a warming limit of 2 degrees Celsius,” the study concludes.

Nonetheless, states, countries and companies with fossil fuel reserves all have an obvious and powerful incentive to keep drilling.

The market value of oil companies, for example, is based in part on the size of their reserves and their ability to find more. Activist investors warning of a “carbon bubble” in their valuations have pushed the companies to assess how many of those reserves could become stranded assets if they can’t be burned. The companies have resisted.

President Obama, meanwhile, has made fighting climate change a key focus of his presidency, raising fuel efficiency standards for cars, pumping public financing into renewable power and pushing for cuts in greenhouse gas emissions from power plants.

Cut demand or cut supply

But Obama has also boasted about America’s surging oil and natural gas production — and tried to claim credit for it. Last week, his administration gave Royal Dutch Shell the green light to hunt for oil in the Arctic Ocean. Keeping oil in the ground does not quite square with his “all of the above” energy policy, observers note. At least, not American oil.

“The same government that is working very hard to get a Clean Power Plan is allowing Shell to go exploring for hydrocarbons in the middle of nowhere, oil that may never be producible,” said climate activist and former hedge fund executive Tom Steyer, with audible exasperation.

He notes that Obama, Brown and other politicians intent on fighting climate change have focused their efforts on cutting the demand for fossil fuels, rather than the supply. Most of the policies that climate activists want to see enacted nationwide — such as placing a price on emissions of carbon dioxide and other greenhouse gases — would do the same, ratcheting down demand rather than placing hard limits on fossil fuel production.

“The political thinking is the market itself will take care of figuring out which fossil fuels have to stay in the ground,” Steyer said.

Some climate fights, however, have focused on supply. And again, the issue of whose fossil fuels have to stay put has played a part.

Opponents of the Keystone XL pipeline extension, for example, see blocking the project — which would run from Canada to America’s Gulf Coast — as a way to stop or at least slow development of Alberta’s enormous oil sands. James Hansen, the former head of NASA’s Goddard Institute for Space Studies, famously declared that fully developing the sands would be “game over for the climate.”

Obama has delayed a decision on the pipeline for years. Given America’s own rising oil production, rejecting a project that could be a boon for the Canadian economy would be difficult, analysts say.

“The message would be, ‘We’re not going to help you develop your resources — we’ll essentially raise the cost,’” said UC Berkeley energy economist Severin Borenstein. He is convinced that Canada will develop the tar sands, regardless.

“It’s become such a huge symbol that it’s impossible for Obama to make a decision on it,” Borenstein said. “I think he’s just going to run out the clock.”

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    East Bay projects are redefining refineries

    Repost from The Contra Costa Times
    [Editor: a shorter version of this article appeared in The Vallejo Times-Herald with byline Robert Rogers.  This seems to be a re-write by Tom Lochner and Rogers.  Interesting to see analysis of all five refineries in the Bay Area, labeled the “Contra Costa-Solano refinery belt, California’s largest.”  Good quotes from our colleagues Tom Griffith and Antonia Juhasz.   – RS]

    East Bay’s oil refineries look to the future

    Upgrades: Projects to allow flexibility to respond to changing energymarkets, but environmentalists raise concerns
    By Tom Lochner and Robert Rogers, September 24, 2014

    chevronThe East Bay’s first oil refinery opened in 1896 near the site of Porkopolis-of-the West, a defunct stockyard and slaughterhouse in the town of Rodeo. In the ensuing decades, four more East Bay refineries joined it, defining the region and powering its growth like no other industry.

    A century later, the Contra Costa-Solano refinery belt, California’s largest, continues to cast an enormous shadow over surrounding cities, influencing their politics, their economies, even their aesthetics. And at a time when fossil fuel seems like yesterday’s energy source, the Bay Area’s five refineries have all embarked on ambitious projects to transform the way they do business — and ensure their economic viability in a rapidly changing global energy market for decades to come.

    These projects, if seen to completion, will diversify the refineries’ operations by allowing them to process both dirtier, heavier oil and cleaner, lighter crude. Two refineries are looking to build their future, at least in part, on crude-by-rail operations, expanding available sources of petroleum while intensifying a controversy over whether that transportation method endangers East Bay communities.

    All told, the upgrades will generate a collective investment in the East Bay of more than $2 billion, while adding hundreds of construction jobs. And once they are completed, proponents say, the projects should result in a substantial combined cut to greenhouse gas emissions, even though many environmentalists remain unsatisfied.

    “While some of these local refinery projects promise to reduce greenhouse gasses, or pollution in general, that’s not nearly enough,” Tom Griffith, co-founder of Martinez Environmental Group, said in a recent email. “And it’s arguable given the cumulative costs.”

    Catherine Reheis-Boyd, president of the Western States Petroleum Association, said oil companies are looking to increase efficiency through these refinery projects while meeting the state’s stricter environmental requirements — not an easy balancing act.

    “They want to continue to supply California. And they want to contribute to the economy of the state,” she said. “What’s different right now is, a lot of the policies being contemplated in California, either at the state level or locally, are making it more difficult to achieve that. The biggest thing is, how do you balance our energy policy with our climate change policies?”

    Even without the new projects, the five East Bay refineries are a critical part of the local economy.

    In 2012, Chevron, Tesoro, Shell, Phillips 66 and Valero processed a total of about 800,000 barrels a day of crude oil, providing more than 7,500 direct jobs, according to industry sources. The oil and gas industry as a whole in the Bay Area generated $4.3 billion that year in state and local taxes, plus another $3.8 billion in federal taxes, according to an April 2014 Los Angeles County Economic Development Corporation study commissioned by the Western States Petroleum Association.

    The biggest project underway is at Chevron, a $1 billion investment to upgrade parts of its century-old 2,900-acre Richmond refinery allowing it to refine dirtier blends of crude with no increase in greenhouse gas emissions, according to the project application.

    Tesoro’s Golden Eagle refinery, near Martinez, has spent nearly as much on upgrades since 2008, and other projects are underway at Shell in Martinez, Phillips 66 in Rodeo and Valero in Benicia.

    ENVIRONMENTAL CONCERNS

    While these sweeping investments offer the promise of new jobs and cleaner, more efficient operations, many environmentalists complain that they don’t go far enough to curb emissions of greenhouse gases that contribute to global warming by trapping heat in the lower atmosphere, and sulfur dioxide and other pollutants that can cause serious health problems in people in surrounding communities.

    And others warn that the improvements will smooth the path for highly flammable crude oil from North America’s Bakken shale region to the East Bay on railroad lines, raising the specter of spectacular explosions from train derailments, as happened last summer in Lac-Mégantic, Quebec, where 47 people died. Those fears have dominated debate over a proposed rail terminal at Benicia’s Valero refinery.

    A growing number of detractors clamor for America to cast off the yoke of fossil-fuel dependency altogether and concentrate on efforts to develop cleaner, renewable energy.

    “The missed opportunity here is for the oil companies to refocus their sights on the future of renewable energy,” Griffith said.

    That aim, albeit more gradual, is the policy of the state under Assembly Bill 32, the California Global Warming Solutions Act of 2006. The legislation calls not only for reducing greenhouse gas emissions but also for reducing the state’s dependency on petroleum.

    The refineries take that as a challenge but not a death warrant.

    “The industry clearly thinks these refineries are here to stay and wants them to adjust to the changes of the makeup of the world’s oil supply, which is dirtier, more dangerous oil,” said Antonia Juhasz, an oil and energy analyst and author of the book “The Tyranny of Oil.”

    Juhasz cited Canadian tar sands oil as the prime example of dirtier crude, and pointed to oil from the Bakken shale formation, mostly in North Dakota, as the prime example of the more dangerous variety.

    Scott Anderson, a San Francisco-based senior vice president and chief economist for Bank of the West, agrees that the increases in renewable energy sources pose no threat to the future of oil refineries locally. In fact, he says, increasing global demand for refined oil products makes refineries like those in Contra Costa and Solano counties an “emerging growth industry for the U.S.”

    “Demand is going to continue to increase, and there haven’t been any new refineries built in the U.S. in decades. So what we’re left with is these projects in existing refineries designed to improve efficiency and flexibility,” he said.

    Here is a look at the major projects underway:

    • At Tesoro’s Golden Eagle refinery, one of the biggest shifts has been bringing in up to 10,000 barrels per day of Bakken crude, which company officials say is critical to replace other sources of petroleum.

    “Our challenge going forward is, as California and Alaskan crudes decline, to find replacements that keep the refinery a viable business,” General Manager Stephen Hansen said.

    “One of those crudes is in the midcontinent, and the only way to get it here is by rail,” he added, noting that the refinery receives crude from ship, pipeline and truck after offloading it from rail cars in Richmond.

    The refinery’s nearly $1 billion in capital upgrades since 2008 have focused not on increasing capacity but on using a wider variety of crude blends and processing them more efficiently, cleanly and safely. A $600 million replacement of the refinery’s coker, for example, has reduced annual carbon dioxide emissions by at least 400,000 tons, according to refinery officials.

    • Shell’s Martinez refinery is seeking to shift some of its refining capacity toward lighter crudes, which it says will allow it to trim greenhouse gas emissions. In phases over several years starting in 2015, the refinery would build processing equipment and permanently shut down one of two coker units, resulting in a reduction in greenhouse gas emissions by 700,000 tons per year.

    Shell spokesman Steve Lesher said the project involves replacing equipment, not expanding the facility beyond its 160,000 barrels per day. He also said the refinery currently processes heavier oil from the San Joaquin Valley but will be bringing in oil from other, as-yet-unidentified sources.

    • Phillips 66 in Rodeo, the region’s oldest refinery, hopes to start recovering and selling the propane and butane that are a byproduct of its refining process, rather than burning them off in a highly polluting process called flaring or using them as fuel in refinery boilers.

    The project would add new infrastructure, including a large steam boiler, propane and butane recovery equipment, six propane storage vessels and treatment facilities and two new rail spurs.

    Phillips 66 has said the project, which was approved by the county Planning Commission in November, would reduce emissions of sulfur dioxide by removing sulfur compounds from refinery fuel gas, and reduce other pollutants and greenhouses gases, but those assertions have been questioned by environmentalists and the Bay Area Air Quality Management District, which wants further evaluation before signing off.

    Two groups have filed an appeal to overturn the Planning Commission’s approval, and in what might be a first for the region, the air district is requiring that the project’s emissions and possible health effects must be considered cumulatively with other refinery-related projects in the Bay Area.

    • Chevron’s plan, which received City Council approval in July after months of intense public debate, is touted as an important upgrade in an increasingly competitive global petrofuels market. While other refineries are gearing up to exploit the North American oil boom, Chevron will continue to get the bulk of its oil from the Persian Gulf and Alaska.

    But the new modernization plan approved in July would allow the refinery to process crude oil blends and gas oils with higher sulfur content, which refinery officials say is critical to producing competitive-priced transportation fuels and lubricating oils in the coming decades.

    In addition, it would replace the refinery’s existing hydrogen-production facilities, built in the 1960s, with a modern plant that is more energy-efficient and yields higher-purity hydrogen, and has the capacity to produce more of it.

    • Valero Refining wants to build a $55 million crude-by-rail unloading facility at its Benicia refinery that could handle daily shipments of up to 70,000 barrels of oil transported in two 50-car trains daily from sources throughout North America. That plan has drawn sharp criticism from locals and leaders in Sacramento concerned about the hazards of increased rail shipments.

    The project would not increase capacity at the refinery but replace crudes that are currently delivered by ship. Nor would it increase emissions from refinery operations, according to a project description on the city of Benicia’s website. The document also cites an air quality analysis indicating that rail cars generate fewer emissions locally than marine vessels.

    The latest projects, while still drawing criticism, have turned some critics into allies. Henry Clark of the West County Toxics Coalition, who played a leading role in getting millions of dollars in settlements for North Richmond residents stemming from a chemical spill linked to the Chevron refinery in the early 1990s, has come out in support of the Chevron modernization.

    “After all the negotiation and community input, we have a better project than we ever expected,” Clark said. “Fenceline communities like North Richmond are going to be next to a safer, cleaner facility and get to share in millions in community benefits.”

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