September 6, 2009

State fees on greenhouse gas output could be near

By Michael Gardner
U-T Sacramento Bureau

SACRAMENTO - State air-quality regulators appear back on track toimpose the nation's first broad-based fee on greenhouse gas emissions,potentially costing Californians a little extra to fill their gastanks, turn up the heat or go out to dinner.

Regulators estimate that overall, the average consumer will payless than $1.50 a year more once the fee is passed down by energyproviders and others that release greenhouse gasses linked to globalwarming.

"We are all aware that California's present economic environment isless than favorable and this is a difficult time to propose a fee,"said Jeannie Blakeslee, a state regulator who helped craft the plan.

"Yet we do not want to lose sight of our long-term goals. Staff hasgone to great lengths to ensure that this fee will be reasonable andwill not be overly burdensome on anyone."

The fee will affect about 250 types of businesses, such as theenergy and cement industries, that burn huge quantities of fossilfuels. Together, those account for 85 percent of California's emissionsof carbon dioxide - the predominant greenhouse gas.

The fee is expected to initially raise about $50 million a year,starting in mid-2010. At first, industry would pay 12 cents for everyton of carbon dioxide released.

Annualized costs spread out among consumers and businesses seemsmall: 62 cents on utility bills and perhaps 65 cents at the gas pumpfor economy cars. A supermarket would pay $95, a family restaurant $14and a 100-person office $7, according to state estimates.

But at 12 cents for every ton released, an oil refinery would payabout $1.3 million a year, and the average cement plant about $200,000.

"Every additional cost adds burden to our already very high cost ofdoing business in the state," said Dorothy Rothrock, representing theCalifornia Manufacturers and Technology Association.

The Air Resources Board proposed the fee to cover theadministrative expensives of implementing its aggressive strategy tocurb global warming, regulating a broad swath of society from big-rigsto landfills to air conditioners. There are about 175 employees workingon climate change issues associated with the board's campaign.

The program has also been living on borrowed money for some time.Exercising authority granted by the Legislature, the board has tappedagriculture, recycling and energy agency accounts to tide it over untila permanent revenue stream can be adopted. Part of the fee - about$13.5 million - will be set aside annually until the money is repaidover the next three years.

Once the loans are repaid, the board plans to lower the fee to 9 cents per ton of greenhouse gases emitted, probably in 2014.

"The fee will eventually be paid by the consumer no matter who pays(upfront)," said Jon Costantino, manager of climate change programs forthe air board.

For example, a chain restaurant can expect higher natural gas and electricity costs of about $14 a year, he said.

A wary Susie Berlin, an attorney representing the Northern California Power Agency, urged the board to cap the levy.

"There are no cost-containment measures," she said. "Because thefee amount is uncapped and the proposed regulation has no terminationprovisions, the total obligation to affected entities can and likelywill increase from year to year."

Regulators agree limits are not included. However, they say, anyincrease would have to be approved by the Legislature and governor aspart of the state budget.

Kristen Grenfell, a lawyer with the Natural Resources Defense Council, urged the board to stay on track.

"This fee is a small price to pay for confronting global warming and transforming our energy economy," she said.

The Air Resources Board seemed prepared to implement the fees threemonths ago, but was interrupted when electricity providers promisedlegal challenges. The original plan could have levied fees on powertransmitted through the state but not used here - a possible violationof federal energy law.

Air board Chairwoman Mary Nichols urged a rewrite, noting that"this is one of those areas where we're blazing a trail. . . . We wantto get it right." However, Nichols was adamant that a legallydefensible fee be imposed on imported electricity because much of it isgenerated using coal - a significant source of greenhouse gasemissions.

The board's staff has subsequently reworked the plan, which is to be presented to the full board Sept. 24.

Under the new proposal, the fee on power providers will be assessedat the point of first delivery, when electricity is placed on the gridfor delivery within California.

Most utilities were still assessing the latest collection plan andhadn't submitted public comments, but Southern California Edison hassignaled its support.

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Michael Gardner: (916) 445-2934;

Related Terms: Global Warming