California may lose two more refineries, would have to rely on gas from abroad

In 2008, California produced 249 million barrels of oil, meeting 38% of state needs, with 13.5% imported from Alaska and the remaining 48.5% from foreign countries. In 2023, California produced just 124 million barrels of oil, meeting 23.4% of state needs, while importing 15.9% from Alaska and 61% from abroad.

Short on the heels of another major refinery closure, Valero signaled it is considering closing its two California refineries that produce over 14% of the state’s gasoline. Refinery closures already have the state importing 8% of its gasoline supply, which means the state could soon have to significantly increase its imports of refined products such as gasoline, on top of its existing reliance on the Middle East and South America for the majority of its crude oil.

Valero announced its profit is down significantly due to very low margins from its refinery business, prompting a question during its earning call about its costly California refineries.

Valero CEO Lane Riggs responded the company has already “minimized strategic [capital expenditures]” in the state and “California is increasing its regulatory pressure on the industry, so we’re really considering everything — all options are on the table.”

While Riggs did not explicitly state that the refineries, which represent over 14% of the state’s remaining refinery capacity, could be shut down, California legislators were quick to ring the alarm bell and tie the potential closures to new refinery regulation powers being granted to the state in a special legislative session called by the governor.

“When California Governor Gavin Newsom said in 2021 he didn’t see a future for oil in CA, I didn’t know 2024 would be the year he ended it at lightning speed,” said State Assembly member Joe Patterson, R-Rocklin, on X. “Today, another refiner said “all options are on table” with refineries here. We can thank Newsom’s legislation.”

Just last week, Phillips 66 announced it is closing its massive Los Angeles refinery complex, which alone has 8% of the state’s refining capacity, right after the new legislation was passed.

New laws making it more difficult to drill for oil in California have brought production levels to half of what they were in 2008. Then, California produced 249 million barrels of oil, meeting 38% of state needs, with 13.5% imported from Alaska and the remaining 48.5% from foreign countries. In 2023, California produced just 124 million barrels of oil, meeting 23.4% of state needs, while importing 15.9% from Alaska and 61% from abroad. California’s foreign oil mostly comes from Iraq and Saudi Arabia in the Middle East and Ecuador and Columbia in Latin America.

Losing a quarter of the state’s refining capacity would necessitate replacement with products refined abroad, which would end up being a lot more expensive than shipping in crude oil to be refined in California, which in turn is more expensive than producing oil in-state and refining it.

Imports are also more subject to price shocks than domestic refining and production due to higher variance in global market conditions, which could be a concern in the future — a widespread war in the Middle East, for example, would already significantly impact California oil supplies today.

Should California adopt more strict Low Carbon Fuel Standard requirements in November, which could include having more strict requirements on refineries and raising their costs, even more refineries may shut down rather than continue operating in California. Under the Low Carbon Fuel Standard program, refiners must either produce low carbon fuels, or purchase credits; should the new standards pass in, California estimates they would add another 47 cents to the cost of each gallon of gasoline and 59 cents in 2025 to each gallon of diesel.

Kenneth Schrupp

Reporter

Related Topics:#TheCenterSquare CaliforniaEnergySystem CaliforniaGasoline CaliforniaOilRefineries KennethSchrupp

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Business

Taxpayers Federation urging Ontario to join Alberta’s carbon tax court fight

Published on October 29, 2024

Todayville

From the Canadian Taxpayers Federation

By Jay Goldberg

The Canadian Taxpayers Federation is calling on Ontario Premier Doug Ford to join the Alberta government and constitutionally challenge against the federal carbon tax.

“Ford has rightly opposed the federal carbon tax for years, but now he has a new chance to beat it in court,” said Jay Goldberg, CTF Ontario Director. “Last time the carbon tax fight went to the Supreme Court, the federal government argued it needed a national carbon tax to deal with a national problem. But then it undercut its own argument for a national carbon tax by making an exception for furnace oil, which clearly favours Atlantic Canada.

“Trudeau torpedoed his own constitutional argument for imposing a carbon tax so it’s time to challenge it in court again.”

Today, the Alberta government announced it has filed an application at the federal court challenging the constitutionality of the carbon tax in the wake of the federal government’s heating oil carbon tax exemption.

Last year, the federal government announced it is removing the carbon tax from heating oil for three years, but did not exempt other forms of home heating energy.

The carve-out disproportionately helps Atlantic Canadians. Only two per cent of Ontario households use furnace oil to heat their homes.

The average Ontario home uses 2,497 cubic metres of natural gas per year. That means removing the current federal carbon tax would save the average home about $381 this year.

“When Trudeau announced his heating oil carve out, he admitted the carbon tax makes life more expensive, he admitted the carbon tax is all about politics and he left the vast majority of Canadians out in the cold,” Goldberg said. “Ford needs to take this new opportunity to join other provinces and fight the carbon tax in court.”

A recent Leger poll commissioned by the CTF shows 60 per cent of Ontarians want the federal government to remove the carbon tax from all heating fuels.

Smith right to fight carbon tax in court

The Canadian Taxpayers Federation applauds Alberta Premier Danielle Smith for launching a renewed constitutional challenge against the federal carbon tax.

“The carbon tax is making the necessities of life in Alberta more expensive and that’s why Smith is right to take Prime Minister Justin Trudeau’s carbon tax back to court,” said Franco Terrazzano, CTF Federal Director. “Last time the carbon tax fight went to the Supreme Court, the federal government argued it needed a national carbon tax to deal with a national problem. But then it undercut its own argument for a national carbon tax by making an exception for furnace oil, which clearly favours Atlantic Canada.

“Trudeau torpedoed his own constitutional argument for imposing a carbon tax so it’s time to challenge it in court again.”

Writing in the National Post, the CTF called on all premiers to launch a new legal challenge against the federal carbon tax.

Last year, the federal government announced it is removing the carbon tax from furnace oil for three years, but did not exempt other forms of home heating energy. Less than one per cent of Alberta households use heating oil.

The average Alberta home uses about 2,935 cubic metres of natural gas per year, according to Statistics Canada. That means scrapping the current federal carbon tax would save the average Alberta home about $440 this year.

“Taxpayers are taking it on the chin every time we pay our heating bills and Trudeau is torpedoing constitutional accountability with his unequal application of the carbon tax,” Terrazzano said. “When Trudeau announced his heating oil carve out, he admitted the carbon tax makes life more expensive, he admitted the carbon tax is all about politics and he left the vast majority of Canadians out in the cold.”

A recent Leger poll commissioned by the CTF shows 70 per cent of Albertans want the federal government to remove the carbon tax from all heating fuels.

Energy

Ottawa’s plan to decarbonize Canada’s electricity by 2035 not feasible and would require equivalent of 23 Site C hydroelectric dams

Published on October 29, 2024

Todayville

From the Fraser Institute

By Elmira Aliakbari and Jock Finlayson

The federal government’s plan to make all electricity generation in Canada carbon-free by 2035 is impractical and highly unlikely, given physical, infrastructure, financial, and regulatory realities. So says a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“Canada’s federal government has set an ambitious, and, frankly, unrealistic target of achieving complete carbon-free electricity in ten years,” said Jock Finlayson, Fraser Institute senior fellow and co-author of Implications of Decarbonizing Canada’s Electricity Grid.

The study finds that in 2023, nearly 81 per cent of Canada’s electricity came from carbon-free energy sources, including hydro, nuclear, wind and solar. But to replace the remaining 19 per cent which uses fossil fuels, in the next 10 years, would require constructing the equivalent of:

• Approximately 23 large hydroelectric dams, similar in size to BC’s Site C, or 24 comparable to Newfoundland and Labrador’s Muskrat Falls, or;

• More than four nuclear power plants similar in size to Ontario’s Darlington power station, or 2.3 large scale nuclear power plants equivalent to Ontario’s Bruce Power, or;

• Around 11,000 large wind turbines, which would not only require substantial investments in back-up power systems (since wind is intermittent) but would also require clearing 7,302 square kilometers of land—larger than the size of Prince Edward Island—excluding the additional land required for transmission infrastructure.

Currently, the process of planning and constructing major electricity generation facilities in Canada is complicated and time-consuming, often marked by delays, regulatory challenges, and significant cost overruns.

For example, BC’s Site C project took approximately 43 years from the initial planning studies in 1971 to receive environmental certification in 2014, with completion expected in 2025 at a cost of $16 billion.

What’s more, the significant energy infrastructure listed above would only meet Canada’s current electricity needs. As Canada’s population grows, the demand for electricity will increase significantly.

“It is not at all realistic that this scale of energy infrastructure can be planned, approved, financed and built in just 10 years, which is what would be required merely to decarbonize Canada’s existing electricity needs,” said Elmira Aliakbari, director natural resource studies at the Fraser Institute and study co-author.

“This doesn’t even account for the additional infrastructure needed to meet future electricity demand. Decarbonizing Canada’s electricity generation by 2035 is another case where the government has set completely unrealistic timelines without any meaningful plan to achieve it.”

This essay examines the implications of decarbonizing Canada’s electricity grid by replacing existing fossil fuel-based generation with clean energy sources.
In 2023, clean energy sources—including hydro, nuclear, and wind—produced 497.6 terawatt hours (TWh) of electricity, accounting for nearly 81% of Canada’s total supply, while fossil fuels contributed 117.7 TWh (19.1%). To replace this fossil fuel generation with hydro power alone would require about 23 large projects similar to BC’s Site C or 24 like Newfoundland & Labrador’s Muskrat Falls. Using nuclear power would necessitate building 2.3 facilities equivalent to Ontario’s Bruce Power or 4.3 similar to Darlington Nuclear Generating Station.
The process of planning and constructing electricity generation facilities in Canada is complex and time-consuming, often marked by delays, regulatory hurdles, and significant cost overruns. For example, the BC Site C project took approximately 43 years from the initial feasibility and planning studies in 1971 to receive environmental certification in 2014, with completion expected in 2025 at a cost of $16 billion.
Land requirements for new electricity generation facilities are also significant; replacing 117.7 TWh of fossil fuel-based electricity with hydro power, for instance, would need approximately 26,345 square kilometers, nearly half the size of Nova Scotia.
The slow pace of regulatory approvals, high and rising costs of major energy projects, substantial land requirements, and public opposition to project siting all cast doubt on the feasibility of achieving the necessary clean electricity infrastructure in the coming decade to fully replace fossil fuels in Canada.