Comment Log Display

Dear Mr. Cliff:

Thank you for the opportunity to submit comments on CARB’s process
for re-assessing industrial leakage potential under the cap and
trade program. We recommend that you revise the oil production
leakage designation from high to low due to several factors.

First, CARB has noted that oil extraction falls into the category
of activities that “have to be located where the reserve is” (CARB
Appendix K p26, Leakage Analysis). In addition, oil producers have
invested many billions of dollars in fixed well, pump, field
treatment, pipeline, and tankage facilities. Thus, oil production
is a domestic captive supplier.

Furthermore, CARB greenhouse gas (GHG) allowances are unlikely to
have any significant effect on production for two reasons. First,
profit margins would not be significantly affected even if GHG
allowance prices were to add a dollar or two per barrel to
production costs. For instance, Midway-Sunset crude oil prices have
tripled over the last decade. Second, production levels have been
driven by reservoir depletion rather than margins even at historic
high prices. 

Thus, we recommend designating oil production as subject to low
risk of leakage. Please see our attached detailed June 6, 2011
comments and feel free to contact me at ed@theicct.org or Chris
Malins, ICCT fuels program lead, at chris@theicct.org with any
questions.

Sincerely,
Ed Pike, PE