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California Governor, Oil/Gas Industry In Discussions on Climate Change

California Gov. Jerry Brown and oil companies are in discussions on extending the state's precedent-setting climate change-related programs, which impact the oil/natural gas industry significantly.

Officials at the Western States Petroleum Association (WSPA) said talks have been ongoing for some time, but there are few, if any, specifics on what is being discussed and how close the parties are to agreement.

"WSPA has been engaged in ongoing talks with the [Brown] administration to improve the state's current climate change programs," said Catherine Reheis-Boyd, WSPA president, adding that the oil/gas sector has a vested interest. "We are serious and committed to improving the state's current programs and ensuring legislative oversight."

The process, Reheis-Boyd said, should help determine California's "next course of action" on combating the impacts of climate change.

A centerpiece of the discussions, according to a report in the Sunday Los Angeles Times, is the state's cap-and-trade program, which is administered by the California Air Resources Board (CARB). That program encountered a serious setback in its latest auction, drawing relatively little interest and revenues after attracting hundreds of millions of dollars in proceeds in auctions held earlier this year and in previous years.

There is also much discussion, reportedly, on California's low-carbon fuel standard (LCFS), which calls for cleaner gasoline. The LCFS is part of a state climate change push that seeks to decrease the amounts of petroleum products consumed in the nation's most populous state.

While there is a pending court challenge to the cap-and-trade program, as well as legislative proposals to extend and change the state's climate change initiative. The climate change initiative, unleashed in a now 10-year-old law (AB 32), set a statewide target of reducing greenhouse gas (GHG) emissions to 1990 levels by 2020.

The California cap-trade program initially held eight state-only auctions beginning in November 2012, and in May completed a seventh joint auction with the Quebec provincial cap-and-trade system in Canada, generating more than $4 billion in proceeds overall so far for California's GHG Reduction Fund. Proceeds of the most recent sale, which was held in May, was a relatively paltry $10 million.

The February sale was the first of 15 cap-trade auctions held by CARB since 2012 that did not result in the sale of all of the offered current vintage allowances -- 71.5 million were offered and slightly more than 68 million sold. In May, only 7.2 million vintage allowances were sold from the more than 67.6 million that were offered.

Brown's office seems intent on getting the oil/gas sector under the tent by late August, when attempts to get a legislative package passed before adjournment this year will be put in high gear.

The Los Angeles Times report, however, indicated that stakeholders are still a long way from a unified strategy that everyone can agree on, particularly the environmental sector.

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