LCFS review drubs oil industry report: top 10 quotes

If you have been following events in California, oil refiners have been waging a well-funded war on California’s Low Carbon Fuel Standard, which requires oil companies to reduce the carbon pollution from gasoline and diesel by 10 percent by 2020.

Centerpiece in their strategy was a June 2012 report from Boston Consulting Group (funded by the Western States Petroleum Association) that concluded that a full and continued implementation of the LCFS would leave refiners “no other option but to refuse to supply the United State’s largest transportation fuels market or to simply shut-down.”

The report was widely slammed. NRDC was apoplectic – here’s why.

Independent review organized

The stink over the BCG report got so unpleasant that UC Davis organized an independent review. The Western States Petroleum Association was one of three funders; the others being the Rockefeller Brothers Fund and the Alliance of Automobile Manufacturers.

The review was released yesterday and the BCG report was drubbed.

Top 10 quotes from the independent reviewers

1. The WSPA report “narrowly focused on the economic impacts of AB32 on the state’s oil refining industry and does not, in the opinion of the reviewers, include a full accounting of the economic impacts, or the health and welfare impacts of the legislation on the broader population and economy of the state.”

2. “We find this [job loss] projection implausibly high…”

3. “The report essentially ignored any benefits to Californians from reinvestment.”

4.  A number of other low-cost pathways have started to emerge that were not originally anticipated… [Including] new low-carbon liquid biofuels that do not require dedicated infrastructure or advanced technology vehicles have emerged.”

5.  “a group of these [compliance option] responses taken together appear able to satisfy the requirements of AB32 more easily and potentially at lower cost than the option included in the BCG scenario.

6.  “recent data and responses… indicate that the responses of the fuels system in California have already been more substantial in several areas than BCG projected. First, the average carbon intensity of transportation biofuels in the state has dropped steadily over the past two years… new sources of “drop-in fuels” such as renewable diesel are coming on line….refiners have the opportunity to accumulate banks of LCFS credits and continued to do so through 2012″

7.  The reviewers cite even one oil company stating, “While no one producer or type of low-carbon fuel will be able to replace traditional petroleum transportation fuels in the near term, Neste Oil believes its efforts, along with others like it, can contribute to the continued success of the LCFS.”

8.  It is “possible that California refiners will diversify upstream into biofuels production, contract for newly developed lower cost domestic crude oils or engage in other strategic activities to maintain profitability and avoid shutting down and laying off refinery workers.”

9.  “The reviewers question whether some of the refineries projected to shut down under AB32 would have shut down only a few years later anyway because of federal fuels regulations and an overall trend towards reduced demand for gasoline which would either cause some of the refiners in the state to change the mix of products they produce or shut down.”

10. “California refiners have also started contracting for lower cost U.S. based crude supplies which have a geographical cost advantage relative to current supplies… these strategies should make refinery economics in the state more favorable…”

READ MORE: NRDC’s Simon Mui gave a more detailed analysis here  — and the overall report in all its glory is available here.