Greenhouse gas bill noxious to business.

Even though momentum is building for action to curb global warming, major business groups and local businesses are lining up against legislation in Sacramento that would place caps on industrial greenhouse gas emissions.

The flashpoint for businesses is AB 32, by Assembly Speaker Fabian Nunez, D-Los Angeles, and Assemblywoman Fran Pavley, D-Agoura Hills, which would make California the first state to adopt the Kyoto Accord by requiring businesses to reduce emissions of greenhouse gases primarily carbon-based chemicals--to 1990 levels by the year 2020.

Oil companies, electric power utilities, cement makers, chemical and steel plants and food processors would all be hit hard by greenhouse gas caps and have formed a coalition aimed at derailing the bill in the closing weeks of the legislative session. These industries say the bill would hike energy costs and force carbon emitters to cut production or move out of state.

"It's already a challenge for manufacturers to grow and hire new employees in California because of high energy costs. The last thing we need is another onerous regulation that will push energy costs even higher and convince companies to take their jobs elsewhere," said Jack Stewart, president of the California Manufacturers and Technology Association.

Among the Los Angeles-area facilities hardest hit would be the eight refineries in the South Bay and harbor areas, electric power plants throughout the region and cement manufacturing plants.

Take the Western States Petroleum Association, which counts six L.A. County refineries among its membership--including BP plc.'s Carson refinery and Chevron Corp.'s El Segundo refinery.

"If these caps are imposed, refineries would have to reduce production 17 percent to get back to 1990 carbon emission levels," said Joe Sparano, president of the association. "That's the equivalent of shutting down three average-sized refineries each producing 100,000 barrels per day of refined product."

Sparano said any decline in refining capacity would have disastrous economic consequences for the state, since refined gasoline that meets California's environmental standards is already in tight supply. "People are saying we need more refineries to bring stability to the gas market, not shut them down."

Besides, Sparano said, "we've already taken many steps to reduce carbon emissions, investing millions of dollars." He cited cogeneration programs that produce electricity onsite using refined oil.

Another argument put forward by business interests is that instead of meeting the caps, some companies will simply shift operations to other states and emit carbon gases from those states.

"The original goal of reducing carbon emissions won't even be realized; they will simply shift to other states, which won't do anything to solve the problem," said Gino diCaro, spokesman for the California Manufacturers and Technology Association.

"By placing an arbitrary carbon emissions cap on California employers, we would be encouraging them to leave our state and take jobs to countries or states that do not impose caps," said Allan Zaremberg, president of the California Chamber of Commerce.

Dramatic potential

Executives of several of the affected facilities were reticent about their opposition, preferring to leave the talking to the trade association spokesmen, such as Sparano and diCaro. Some executives expressed concern about being perceived as being on the wrong side of an increasingly popular issue. Also, some fear that if they speak out, their companies might be targeted by state regulators eager to make examples out of them.

But one of the few companies speaking out against the Nunez/Pavley bill is Glendora-based California Portland Cement Co., which has cement making plants in Colton and Mojave.

"Fundamentally, we oppose AB 32. It has the potential for dramatic impact on our industry," said Scott Isaacson, vice president with California Portland Cement who oversees the company's environmental compliance programs.

Although companies that could not meet the new caps could buy credits under a "cap and trade" program, Isaacson said the program would do little good.

"A cap and trade program would limit production in California, force more reliance on imports and drive up the price for cement," Isaacson said.

Isaacson said it was premature to speculate how much production his company may move out of state or cut entirely, since much would depend on the timelines and limits that would be developed by state regulators over the next couple years.

He also said that most other industries can take steps to reduce overall energy consumption and thereby cut carbon emissions. But carbon emissions are an integral part of the cement-making process, which involves heating limestone until much of the carbon escapes. Cutting carbon emissions, be said, translates directly into production cutbacks.

"We're not opposed to reporting our carbon emissions, as we do to the U.S. EPA (Environmental Protection Agency) or participating in voluntary reduction programs, which we have done. But a mandatory program is not acceptable," he said.

Isaacson's comments were echoed by other industries. Edison International, parent company of Southern California Edison, issued a statement saying, "we are concerned about the potential long-term impact of AB 32 as currently drafted on the California economy. That is why we, along with other interested parties, are actively engaged in discussions with the Speaker's office and the (Gov. Arnold Schwarzenegger) administration to develop a workable climate change policy."

In fact, the Schwarzenegger administration recently proposed amendments that would soften the blow. The amendments would set up a separate Climate Action Board composed of members of the governor's administration to establish specific timelines and, if warranted, to alter them if the economic harm resulting from the caps is deemed to be great.

However, proponents of the Nunez/Pavley legislation disagree with the notion that the bill is a job killer.

They say that mandatory caps on carbon emissions would force the development of new technologies, much as 1970s limits on tailpipe emissions from cars sped the development of the catalytic converter.

"The opponents of this bill greatly underestimate the ability of technology to solve some of their concerns," said Richard Stapler, a consultant in the office of Assembly Speaker Nunez. He also noted that the first limits on carbon emissions would not go into effect until 2012, "and even then, it will be gradual over eight years."

Proponents also say that the legislation has the potential to create thousands of jobs in the alternative fuels industry. That's why it has strong support from such "green energy" companies as Los Angeles-based Solar Integrated Technologies, a maker of solar power panels.

The bill also has the support of the California Ski Industry Association, which sees its economic survival threatened by the impacts of global warming. The association counts 25 member ski resorts, including the Mountain High Resort in Wrightwood on the north slope of the San Gabriel Mountains.

"We're seeing just about every mountain community in the Alps being impacted by global warming. If we don't start cutting back on greenhouse gas emissions, business at mountain resorts here will suffer in the long run," said Bob Roberts, executive director of the California Ski Industry Association.

Roberts said that other sectors in the recreation and tourism industry were taking a much more guarded approach.

"The larger groups, particularly the hoteliers, are trying to find ways of making themselves green. They see the way that public opinion is shifting on this issue. But they don't want to get too far ahead of their shareholders. So they are viewing this with caution," he said.