California Oil Imports Debate Heats Up
02/11/08 - 02:08 PM EST
Chuck Marvin
During a gathering last summer in Southern California, various municipal authorities, oil company representatives and neighborhood residents met to discuss the pros and cons of petroleum import terminals in their areas.
At one point in the discussion, outright frustration suddenly pierced a thin veil of diplomacy in the meeting room. "The representative from the California Energy Commission threw his presentation materials down onto the podium and stormed out of the room in disgust," according to Lynn Westfall, chief economist of refiner Tesoro(TSO Quote - Cramer on TSO - Stock Picks), who was also in attendance at the event. At issue was the growing resentment by environmentalists and neighborhood groups toward oil import terminals in their areas -- at a time when the demand for those imports is rapidly increasing. California is becoming the testing ground in which powerful interest groups are butting heads over energy policy. Officials across the country are watching the debate in California closely, because the state frequently acts as a precursor for nationwide shifts in key public policy issues. On one side of the debate are interest groups who want to squeeze out petroleum import terminals from important California ports such as those of Los Angeles and Long Beach. Among other things, they argue that pollution from inbound tankers and on-land storage tanks is hazardous to the nearby environment and can be deadly to the residents who live nearby. The other side has economists representing the state, oil producers like Chevron (CVX Quote - Cramer on CVX - Stock Picks) and refiners like Valero (VLO Quote - Cramer on VLO - Stock Picks) and Tesoro. These groups argue that unless new import terminals are built or existing terminals are expanded, California and others who depend on its ports will soon find themselves lacking the essential infrastructure necessary to support their growing need for traditional energy supplies. The crux of the debate rests on the issue of who gets to decide what items enter and leave major ports. While ports are typically municipal bodies with power ceded to them by cities, the decisions that port authorities make do not only affect local concerns. Rather, their decisions trickle through to a broad base of stakeholders, many of whom are not given the right to elect or choose those who make the original decisions. A number of things make California special in the energy debate. First, it has a left-leaning, politically charged constituency that is large enough to affect nationwide policy decisions through its voting and consumer habits. These groups can be rabidly antagonistic toward oil companies and their attempts to expand or build new infrastructure. Second, California houses enormous ports that draw more than 40% of all goods brought into the U.S. The decisions made by these ports not only affect what enters and leaves the marine terminals in California, but also affects oil imports that ultimately flow into bordering states like Arizona, Nevada and Oregon. Energy industry and environmental leaders all know that whatever policies are chosen in California could quickly be adopted as the benchmark nationwide. Gov. Schwarzenegger's administration has taken steps for California to lead the country in promoting environmental awareness through such measures as higher gas mileage for automobiles and reduced emissions of greenhouse gasses such as carbon dioxide. However, recent publications and presentations made by the California Energy Commission, whose members are appointed by the governor's office, are uniform in asserting that, even under the best-case scenarios for the advancing adoption of clean energy sources, the demand for fossil fuel imports coming through California's port systems will increase in the intermediate and long term.
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