SAN ANTONIO -- Tesoro Corp. said that its operating subsidiary, Tesoro Refining & Marketing Co., has filed a lawsuit against the California Air Resources Board (CARB) to prevent the implementation of a new regulation that it said would essentially mandate the addition of more crop-based ethanol to gasoline in the State of California. In addition, the company is seeking a temporary injunction to stop enforcement of the rule while the lawsuit is being heard.
On Aug. 29, 2008, CARB finalized a rule concerning gasoline specifications for the state of California. The new rule would result [image-nocss] in refiners increasing the amount of crop-based ethanol in gasoline from the current level of 5.7% to as much as 10% by Dec. 31, 2009.
"To date, refiners have made significant investments in California to reduce emissions in the State and to ensure full compliance with existing ethanol requirements; however, more and more questions are emerging about the impact crop-based ethanol has on our environment and food supply. We think greater review of the environmental and economic impact of this fuel supply is needed before we increase the ethanol requirements in California gasoline," said Bruce Smith, Tesoro chairman, president and CEO.
Tesoro noted that the impact of crop-based ethanol is multi-faceted and that even the future availability of the fuel could be at risk if the current 51-cents-per-gallon subsidy is overturned. At a minimum, recent scientific evidence reveals that crop-based ethanol is harmful to the environment in terms of increases in greenhouse gas emissions, damage due to runoff from greater fertilizer use and higher water usage, it said.
The company said that it is concerned that the new fuel standards conflict with an existing California requirement, which calls for greenhouse gas emissions in the state to be reduced. "The CARB rule which results in the increase of crop-based ethanol in gasoline violates the intent established by another California regulation (AB 32), which calls for a decrease in greenhouse gas emissions to 1990 levels by 2020," added Smith. "This new rule increases greenhouse gases – through the addition of more crop-based ethanol—at the same time we are investing to reduce greenhouse gases."
Tesoro said that it is also concerned that more needs to be done to better understand the impact of crop-based ethanol use on food prices across the country. "We support the need for a comprehensive energy plan that includes alternative fuels, petroleum products and conservation. We believe there is an important and necessary role for alternative fuels but we want industry and business leaders, elected officials, and regulators to proceed in a cautious, thoughtful manner to ensure we consider environmental and economic impacts when policies are created," said Smith.
In addition to the lawsuit, Tesoro intends to meet with other industry and business participants, elected officials and regulators to urge a more comprehensive approach to ethanol use in the state and ultimately across the country.
San Antonio-based Tesoro has a significant presence in California with its refinery in Martinez, the second-largest refinery in Northern California, which employs 700 full-time workers, and its refinery in Los Angeles that employs 450 full-time workers. The company recently invested more than $600 million at the Martinez refinery to reduce 3,000 tons of criteria pollutants each year. At its Los Angeles refinery, it recently invested more than $125 million on new equipment that has reduced particulate emissions. The company's California retail system, including the Tesoro, USA Gasoline, Mirastar and Shell brands, consists of 429 branded retail stations. Tesoro's total retail-marketing system includes more than 900 stations, of which more than 430 are company owned under the Tesoro, Shell, Mirastar and USA Gasoline brands.
The company expects a ruling on the temporary injunction in the next 30-60 days. A final ruling should be completed within the year.
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