NEXTGEN CLIMATE FOUNDER & PRESIDENT TOM STEYER CALLS FOR ANSWERS FROM BIG OIL ON GAS PRICE SPIKE IN CALIFORNIA
Steyer Says If Oil Company Executives Won’t Answer Questions They Should Face Subpoena
May 5, 2015 3:53 PM
SAN FRANCISCO—NextGen Climate Founder and President Tom Steyer today spoke at a Chevron gas station about the recent gas price spike in California and called on the State Senate to subpoena oil company executives if they refuse to provide answers to basic questions about their pricing and oil refining practices.
“As everyone knows, the oil companies have been charging Californians up to $1 billion per month more for gasoline than if we paid the national average,” Steyer said. “It’s time to put an end to the Big Oil giveaway, and start giving Californians a fair shake.”
Steyer also highlighted recent comments made by Chevron during its first quarter earnings call with investors last week. Chevron’s general manager of investor relations, Jeff Gustavson, noted that refining margins “increased earnings by $435 million driven by unplanned industry downtime and tight product supply on the U.S. West Coast.”
As Steyer noted, Chevron is saying for the oil industry, “their problems were good for their profits.” Steyer also highlighted the problem with the lack of transparency into the oil industry’s business practices, saying “we don’t have the facts we need in order to know if we’re paying fair prices based on the market, or if oil companies are deliberately taking actions which lower supplies and drive profits higher.”
Oil company executives had the opportunity to show up for a Senate hearing in March, to answer questions and allow Californians to judge whether they are being unfairly gouged at the pump. But industry executives refused to show up, instead sending a paid economist who then claimed he didn’t speak for the oil companies. If these executives continue refusing to answer for their business practices, the State Senate should subpoena these executives to force them to answer to Californians. Once Big Oil answers this call, we can begin to fix California’s rigged gasoline market and give Californians the fair shake they deserve.
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NextGen Climate is focused on bringing climate change to the forefront of American politics. Founded by Tom Steyer in 2013, NextGen Climate acts politically to prevent climate disaster and promote prosperity for all Americans.
By David R. Baker, 4 May 2015, 7:23 pm
The ExxonMobil refinery is seen after an explosion in a gasoline processing unit at the facility, in Torrance, Calif., on Wednesday, Feb. 18, 2015. Two workers suffered minor injuries and a small fire at the unit was quickly put out. The incident triggered a safety flare to burn off flammable substances. The facility about 20 miles south of downtown Los Angeles covers 750 acres, employs over a thousand people, and processes an average of 155,000 barrels of crude oil per day, according to the company. (AP Photo/Nick Ut) Photo: Nick Ut, Associated Press
California’s gasoline prices jumped 31 cents in the last week, pushed higher by rising crude oil costs and problems at several state refineries.
It’s the second time this year that California drivers have faced such a steep price spike. And it has some oil company critics livid at a state gasoline market they say is designed to fail.
“This is a problem that only benefits them, to the expense of California consumers,” said Tom Steyer, the billionaire environmental activist who has pushed to raise the oil industry’s taxes in the state. “When you look at an oligopoly, is there anyone there with an incentive to solve this problem? I would say no.”
The average cost of a gallon of regular in California hit $ 3.71 on Monday, according to GasBuddy.com. Less than a month ago, in mid- April, regular was selling for less than $ 3.10.
And while gas prices have been moving higher nationwide, California has by far the nation’s priciest fuel. Even Hawaii currently pays less, with an average of $ 3.20. The national average stands at $ 2.63, according to GasBuddy.com.
Part of the problem lies in crude oil prices, which have risen 34 percent since mid-March. But California’s sudden price surge also reflects unique aspects of the state’s gasoline market that have frustrated drivers for more than a decade.
California uses its own pollution-fighting fuel blends not found in other states. As a result, most of California’s gasoline is made by 14 refineries located within the state’s borders. The state also has some of the country’s highest gasoline taxes — almost 66 cents per gallon. And starting in January, California’s cap-and-trade system for reining in greenhouse gas emissions added 10 cents to the overall cost, according to estimates.
Since only a limited number of refineries make California grade gasoline, any hiccup in production can move prices. In February, Tesoro temporarily shut down its Martinez refinery in response to a labor strike, and an explosion hobbled Exxon Mobil’s refinery in Torrance ( Los Angeles County). Prices soared for four weeks.
Analysts blame the current spike on production glitches at the Tesoro refinery in Martinez and the Chevron refinery in Richmond, which suffered a flaring incident on April 21.
In addition, the Oil Price Information Service reported last week that Chevron took down a key unit at its El Segundo ( Los Angeles County) refinery for maintenance, prompting the company to buy up extra gasoline supplies on the wholesale “spot” market to fulfill its contracts to fuel distributors. A Chevron spokesman declined to comment on the El Segundo refinery.
The price spike may be easing, with the statewide average rising just 1 cent overnight from Sunday to Monday. Wholesale prices are already started to fall.
Consumer advocates have long argued that the oil companies benefit from keeping gasoline supplies tight in California, with too little fuel held in storage for when the next refinery breakdown strikes.
A new report from the nonprofit group Consumer Watchdog argues that refinery profit margins in the state rise during price spikes — even when a company has to buy extra wholesale gasoline to make up for refinery downtime. Soaring retail prices more than make up for the added expense of buying extra supplies, said Jamie Court, the group’s president.
“The oil companies know that even if it’s their refinery that’s knocked out, the higher prices will more than compensate them,” he said.
Court wants the state to require oil companies to maintain a specific amount of fuel in storage, to prevent or at least lessen future price spikes.
The U. S. Department of Energy is studying the idea of a fuel “reserve” on the West Coast — similar to the nation’s Strategic Petroleum Reserve — but has framed it as a way to prevent supply disruptions after natural disasters, such as earthquakes or tsunamis. Tupper Hull, spokesman for the Western States Petroleum Association, said California officials have considered the idea before — and rejected it as unworkable.
“Intuitively, setting aside large volumes of fuel from the market is not going to help,” Hull said.
California Pledges Changes in Protecting Underground Water
By Ellen Knickmeyer, AP, Feb 9, 2015
California has proposed closing by October up to 140 oilfield wells that state regulators had allowed to inject into federally protected drinking water aquifers, state officials said Monday.
The deadline is part of a broad plan the state sent the U.S. Environmental Protection Agency last week for bringing state regulation of oil and gas operations back into compliance with federal safe-drinking water requirements. State authorities made the plan public Monday.
An ongoing state review mandated by the EPA found more than 2,500 oil and gas injection wells that the state authorized into aquifers that were supposed to be protected as current or potential sources of water for drinking and watering crops.
An Associated Press analysis found hundreds of the now-challenged state permits for oilfield injection into protected aquifers have been granted since 2011, despite the state’s drought and growing warnings from the EPA about lax state protection of water aquifers in areas of oil and gas operations.
Steve Bohlen, head of the state Department of Conservation’s oil and gas division, told reporters Monday that the proposed regulatory changes were “long overdue.”
EPA spokeswoman Nahal Mogharabi said Monday that federal authorities would review the new state plan over coming weeks. “EPA will then work with the State to ensure that the plan contains actions that will bring their program into compliance with the Safe Drinking Water Act,” Mogharabi said. She referred to landmark 1974 legislation that sought to protect underground drinking-water sources from oil and gas operations.
Bohlen said 140 of those 2,500 injection wells were of primary concern to the state now because they were actively injecting oil-field fluids into aquifers with especially good water quality.
State water officials currently are reviewing those 140 oil-field wells to see which are near water wells and to assess any contamination of water aquifers from the oil and gas operations, Bohlen said.
Part of the state plan released Monday would set an Oct. 15 deadline to stop injection into those water aquifers deemed most vital to protect them from contamination. State officials also could shut down oil field wells sooner if they are deemed to jeopardize nearby water wells, authorities said. This summer, the state ordered oil companies to stop using at least nine oil field wells that altogether had more than 100 water wells nearby.
The U.S. EPA had given the state until Friday to detail how it would deal with current injection into protected water aquifers and stop future permitting of risky injection.
While some of the fluids and materials that oil companies inject underground as part of normal production is simply water, some can contain high levels of salt or other material that can render water unfit for drinking or irrigating crops.
California is the nation’s third-largest oil-producing state, and oil companies say the kind of injection wells under scrutiny are vital to the state’s oil production.
Tupper Hull, a spokesman for the Western State Petroleum Association, said the oil-industry group feared state regulators would not be able to meet all the deadlines they were setting for compliance with federal water standards.
If that happens, oil producers “would be put into the untenable position of having to shut in wells or reduce production,” Hull said.
Repost from The Wall Street Journal [Editor: Following the money… WSJ’s important analysis of refinery trends in California includes a brief discussion of current and proposed projects, including Valero Benicia, with quotes by Valero spokesperson Bill Day and Andrés Soto on behalf of Benicians For a Safe and Healthy Community. Significant quote: “Opposition over safety has drawn out the permitting process in some cases, making some companies rethink their strategies. Valero Energy Corp. in March canceled plans to build an oil-train terminal near its Los Angeles refinery. But Valero still hopes to add a terminal to the company’s Benicia, Calif., plant, 35 miles northeast of San Francisco. ¶“Every day that goes by that we’re not able to bring in lower cost North American oil, is another day that the Benicia refinery suffers competitively,” says spokesman Bill Day. The state last month asked Benicia for another safety review to better forecast the potential for derailments and other accidents.” – RS]
California Finally to Reap Fracking’s Riches
Crude-by-Rail From Bakken Shale Is Poised to Reverse State Refiners’ Rising Imports
By Alison Sider and Cassandra Sweet, Oct. 7, 2014
Tanker cars line up in Bakersfield, Calif., where Alon USA Energy recently received permission to build the state’s biggest oil-train terminal. The Bakersfield Californian/Associated Press
For the past decade, the U.S. shale boom has mostly passed by California, forcing oil refiners in the state to import expensive crude.
Now that’s changing as energy companies overcome opposition to forge ahead with rail depots that will get oil from North Dakota’s Bakken Shale.
Thanks in large measure to hydraulic fracturing, the U.S. has reduced oil imports from countries such as Iraq and Russia by 30% over the last decade. Yet in California, imports have shot up by a third to account for more than half the state’s oil supply.
“California refineries arguably have the most expensive crude slate in North America,” says David Hackett, president of energy consulting firm Stillwater Associates.
Part of the problem is that no major oil pipelines run across the Rocky Mountains connecting the state to fracking wells in the rest of the country. And building pipelines is a lengthy, expensive process.
Railroads are transporting a rising tide of low-price shale oil from North Dakota and elsewhere to the East and Gulf coasts, helping to keep a lid on prices for gasoline and other refined products.
Yet while California has enough track to carry in crude, the state doesn’t have enough terminals to unload the oil from tanker cars and transfer it to refineries on site or by pipeline or truck.
Just 500,000 barrels of oil a month, or 1% of California’s supply, moves by rail to the state today. New oil-train terminals by 2016 could draw that much in a day, if company proposals are successful.
Bakken oil since April has been about $15 a barrel cheaper than crude from Alaska and abroad, according to commodities-pricing service Platts. That would cover the $12 a barrel that it costs to ship North Dakota crude to California by rail, according to research firm Argus.
The state’s lengthy permitting process has contributed to the shortage of oil-train terminals. Some California lawmakers also want to impose fees on oil trains to pay for firefighting equipment and training to deal with derailments and explosions. And community and environmental activists have been waging war on oil trains. The dangers of carrying hazardous materials by rail were underscored Tuesday when a train carrying petroleum derailed in Canada.
But energy companies recently won two hard-fought victories that will pave the way for California to get more crude by rail.
Kern County officials last month gave Alon USA Energy Inc. permission to build the state’s biggest oil-train terminal. That project, which the company hopes to finish next year, is designed to receive 150,000 barrels of oil a day in Bakersfield, Calif., 110 miles north of Los Angeles.
The site was home to an asphalt refinery until 2012 when Alon shut it down because it struggled to turn a profit. Alon plans to reconfigure and restart the plant, but much of the oil transported there by train will move by pipeline to other companies’ refineries in California.
Plains All American Pipeline LP says it plans to open a 70,000-barrel-a-day oil-train terminal in Bakersfield this month.
And in northern California, a judge last month dismissed a lawsuit brought by environmental groups that challenged Kinder Morgan Inc.’s rail permits. The company is now receiving oil trains at a Richmond, Calif., terminal near San Francisco that was built to handle ethanol.
Opposition over safety has drawn out the permitting process in some cases, making some companies rethink their strategies. Valero Energy Corp. in March canceled plans to build an oil-train terminal near its Los Angeles refinery. But Valero still hopes to add a terminal to the company’s Benicia, Calif., plant, 35 miles northeast of San Francisco.
“Every day that goes by that we’re not able to bring in lower cost North American oil, is another day that the Benicia refinery suffers competitively,” says spokesman Bill Day. The state last month asked Benicia for another safety review to better forecast the potential for derailments and other accidents.
Several oil-train explosions in the last 15 months—including last year’s blast in Lac-Mégantic, Quebec, that killed 47 people—have struck fear in many residents along rail corridors.
“These railcars are not safe at any speed,” says Andrés Soto, a musician from Benicia who has helped organize campaigns against several oil-train projects. “We don’t see that there’s any way that they can actually make these projects fail-safe.”
Environmental-impact challenges have been one means that groups have used to delay oil trains.
Pittsburg, Calif., officials say WesPac Midstream LLC’s proposed oil-train terminal is on hold after the state attorney general asked for an expanded environmental review. The company is gathering answers for regulators and hopes to gain approval and start accepting oil trains at the site by late 2016, 40 miles east of San Francisco, a WesPac spokesman says.
Even if oil trains are kept off California tracks, more fracked crude still could flow to California. A 360,000-barrel-a-day oil-train terminal in Vancouver, Wash., aims to transfer North Dakota crude from tanker cars to barges that will sail the Columbia River about 100 miles northwest to the Pacific Ocean. From there, it is a quick trip down the coast to California ports.
That project also has faced stiff headwinds. Refiner Tesoro Corp. and transportation provider Savage Cos. were forced to postpone the start for the Vancouver terminal because of approval delays. While the governor hasn’t approved the project, the companies say they expect to be up and running next year.
Part of the problem is that no major oil pipelines run across the Rocky Mountains connecting the state to fracking wells in the rest of the country. And building pipelines is a lengthy, expensive process.