Comment Log Display

Dear Clerk of the Board:

Tesoro Corporation, a Fortune 100 company, is an independent
refiner and marketer of petroleum products. Tesoro, through its
subsidiaries, operates six refineries in the western United States
with a combined capacity of over 845,000 barrels per day. Tesoro's
retail-marketing system includes more than 2,200 retail stations,
under the Tesoro®, Shell® ARCO® and USA Gasoline™ brands, of which
more than 570 are company operated. Tesoro closed on the purchase
of BP’s southern California business in June 2013; we now supply
approximately 25% of the state’s transportation needs through our
Martinez refinery in the Bay Area and our Los Angeles refinery in
southern California.   We employ 3900 Californians through our
refineries, logistics assets and retail network.

Tesoro is also a member of the Western States Petroleum Association
(WSPA) and has participated in the development of comments
submitted to CARB regarding the Cap and Trade Regulation. Tesoro
concurs with and hereby incorporates by reference comments
submitted by WSPA.  

Tesoro would like to comment on two specific areas. First, we
commend the Air Resources Board (ARB) and the California Public
Utility Commission (CPUC) for their well-coordinated efforts to
develop ARB’s methodologies for power allocation and CPUC’s
methodologies for auction revenue sharing to provide equity among
EITE entities.   We believe, however, that disparities exist
between EITE entities serviced by the Publicly Owned Utilities
(POU) depending on the extent of self-generation.  We encourage ARB
to work with the POU’s towards equitable treatment of EITE entities
within their service areas.

Second, we would like to request recognition of the early reduction
projects such as the Tesoro Golden Eagle Coker Modification Project
within the Complexity Weighted Barrel (CWB) benchmark method. In
2008 Tesoro implemented its Coker Modification Project (CMP) at the
Golden Eagle Refinery near Martinez, California, that resulted in
early reductions of greenhouse gases and other pollutants.  GHG
emission reductions from the project were 462,000 tonnes/yr based
on the third party verified emission reports.  The project was the
largest single emission reduction measure reported for the refining
sector in the Energy Efficiency and Co-Benefits Assessments and
resulted in reductions of overall energy use, criteria pollutants
and air toxic emissions.  The project did not change production at
the Golden Eagle Refinery.  The emission reductions are real,
permanent and verifiable.

Tesoro presented information to ARB staff demonstrating that as a
result of project implementation, CWB, the proxy adopted for
refinery sector output, is disproportionally reduced relative to
refinery production.  The Tesoro’s CMP project replaced the
existing fluid coking process with a delayed coking process which
is a less carbon intensive process.  Consequently, the CWB factor
for delayed coking, which is lower than the factor for fluid
coking, would be used in calculating allowance allocation for the
second and third compliance period.  This regulatory approach
stifles innovation and reduces incentives to implement an alternate
process to reduce multiple pollutants. Instead, the proposed
regulation only serves to encourage an entity to continue to
operate the same inefficient unit and to either purchase credits or
install control equipment (if technology exists) for a single
pollutant.  

We recognize that the development of a refinery benchmarking method
has been a difficult task.  In many instances, changes in refinery
operations may result in corresponding changes to refinery
production.  However, this is not the case for Tesoro’s CMP project
for which the refinery has continued to retain its capacity to
produce clean California fuels.  To ensure equitable treatment, we
request that ARB allows the use of a CWB factor for fluid coking in
determining allocation for Tesoro’s Golden Eagle refinery coking
process.

The current regulatory approach that results in a reduction in
allocations to a facility because it adopts a less carbon intensive
process resulting in multiple pollutant reductions is contrary to
the objectives of AB32.  In fact, ARB recognized the need to
provide incentives in choosing an allocation methodology for the
first compliance period by considering an allowance allocation
based on the operation of the fluid coking process.  Therefore, we
are requesting that the same treatment continues into the second
and third compliance period.  To accomplish this, we suggest that
ARB provide a mechanism for Executive Officer review of projects
that adopt less carbon intensive operations and ensure that
allocations are not inequitably reduced as a result of the proxy
chosen to represent refinery output.  We would expect such review
to be supported by a thorough analysis of emissions, unit
operations, and production.  We believe this proposal is consistent
with the objectives of AB-32.

Tesoro appreciates the opportunity to submit comments on the Cap
and Trade Program Regulations. 

Sincerely,




Daniel T. Riley
Vice President
State & Local Government Affairs