Need to Know: The Case for Oil Transparency in California

Overview

California today stands at two ends of a spectrum: the nation’s climate policy leader is also the country’s third largest oil-producing state and the state with the third largest oil-refining capacity in the nation. Despite ambitious goals to reduce carbon emissions, some California oils are as high-emitting as Canadian oil sands and other difficult-to-extract heavy oils. This poses critical global climate risks and calls for immediate policy attention. However, California cannot manage what it does not measure, and policy solutions are hindered by a lack of information about the oil and resulting petroleum products that emerge from—and pass through—the state.

Oil resources are far more heterogeneous than is publicly acknowledged. They are as different from each other in composition as paint thinner is from peanut butter. The differing nature of oils is apparent in California where a multitude of diverse resources make their way through the state’s oil supply chain, from state oil fields that have been producing for over a century, to imported sources from Saudi Arabia, Ecuador, and Canada, which also vary significantly in composition.

Measurable differences and variations in extraction methods, processing requirements, refining techniques, and the slate of end products results in wildly varying emissions of greenhouse gases (GHGs) between these oils.

Despite these differences, California policies do not fully take into account this high variance in emissions that are propagated through the lifecycles of California’s oils, and therefore these differences are not well understood. While California policymakers have developed carbon intensity values for crude production, no data is collected on the oil’s chemical composition which is required to accurately assess the impacts of refining and the products made for end use. Such basic oil information is needed so that businesses, investors, policymakers, and citizens can responsibly manage the lifecycle emissions from the entire oil barrel.

The wide-ranging GHG emissions throughout the oil supply chain—from production, transport, refining, and end use of the entire yield of petroleum products—highlight the opportunity for oil data transparency to inform action. They also demonstrate the prospects for innovation in the oil sector.

General Finding: Greater transparency, even if limited to these most critical fields, would help pinpoint challenges to and opportunities for GHG and air quality emissions reductions.

Opportunities at the state and local levels

While federal climate policy goes through a period of transition and uncertainty, state, regional, and local policymakers remain committed to significant reductions in greenhouse gas (GHG) emissions. This is vital because the bulk of the climate impacts—and burden of adaptation costs—will be borne by citizens at the state, regional, and local levels.

The opportunity for continued emissions reduction is especially evident in California where the public realizes the risks of inaction and politicians recognize the rewards—from climate mitigation to securing a competitive global advantage. Other states and nations watch California intently to see what future emissions policy will look like. The state has significant impact—with a GDP comprising nearly one in seven dollars of total U.S. GDP, the world’s sixth largest economy, and decades of experience implementing targeted GHG emission reduction policies.

California faces critical questions about oil’s lifecycle emissions, as the state debates the recently proposed strategy to meet its 2030 climate targets. Can California better manage production of its most difficult oil resources? How can refining operations innovate to cut emissions? And what is the full extent of the climate liability that results from residual petroleum products—both at home and beyond California’s borders?

Changing Emissions Supply Curve

To begin to answer these questions, Carnegie analyzed California’s crude oils using the Oil-Climate Index (OCI), an open-source web tool that estimates GHGs through the oil supply chain. Upstream GHGs are modeled using Stanford University’s Oil Production Greenhouse Gas Emissions Estimator (OPGEE) with oil field production data obtained from the California Air Resources Board (CARB) and the state’s Division of Oil, Gas, and Geothermal Resources (DOGGR).

California regulators do not currently collect nor can the public access a catalogue of state oil assays—a chemical analysis that details an oil’s composition that is performed by oil companies for non-proprietary marketing purposes. Proxy assays were used to estimate midstream and downstream emissions using OCI smart defaults from the University of Calgary’s Petroleum Refinery Life Cycle Inventory Model (PRELIM) and Carnegie‘s Oil Product Emissions Module (OPEM). The use of proxy assays provides an approximation in the absence of actual assays. But this likely introduces error to estimated refining emissions on the order of plus or minus 50 percent. This highlights why transparent assay data is needed. Together, these estimates show wide-ranging climate impacts from 154 California oil fields (Figure 1).

As illustrated, there is no standard, average oil in California. The OCI reveals at least a 60 percent gap between the least emissions-intense and most emissions-intense oils in the state, with some producing closer to 450 kilograms of carbon dioxide equivalent emissions per barrel and others producing more than 750 kilograms per barrel. California’s oil ranks among some of the highest- and lowest-emitting worldwide. Some California oils are as high-emitting as Canadian oil sands and other difficult-to-extract heavy oils, for example, in Indonesia. Other California oils are relatively low emitting compared to other global crudes in Norway and Kazakhstan.

General Finding: California is well positioned to gather this information that can guide policymaking and spur innovation.

Targets of Climate Mitigation and Possible Air Quality Improvement

Where should California begin this quest? There are many opportunities for action across the state as shown in Figures 2-4. High-GHG oils with the largest production volumes—Midway Sunset, South Belridge, and Kern River, all of which are in the San Joaquin Valley—pose critical climate risks and call for immediate policy attention.

A significant slate of other oils spanning the California landscape pose moderate climate risks, from the Central Valley out to the Central Coast and down to the South Coast. Climate risks can be driven by high production levels or high per-barrel emissions. Many California oil fields, like Midway Sunset and Wilmington, which have been in production for a century or longer, are depleted. These depleted resources require enhanced oil recovery (EOR) techniques that simultaneously raise production levels and per-barrel emissions, elevating climate risks. Future EOR breakthroughs must work to reduce per-barrel oil emissions intensity in order to protect the climate while still increasing production levels. Select California fields now produce crudes that rival Canadian oils sands in their GHG emissions. To prevent emissions from rising, they will require ongoing monitoring, data reporting, and verification using tools like the OCI.

In addition to climate change, air quality risks can arise depending on an oil’s characteristics and the specifications of its supply chain. Heavier oils, like Midway Sunset and others near ­Bakersfield—one of the most polluted cities in the nation—are thought to produce higher particulate emissions in their production, refining, and end use. On the other hand, lighter oils pose a higher risk for emissions of methane and volatile organic compounds that cause smog. And the higher an oil’s sulfur content—another oil characteristic that California does not appear to closely track—the greater its risk of sulfur oxide emissions.  CARB has a long track record of overseeing air pollution permitting. Oil assays would facilitate tracking risk profiles that change over time as oil conditions change.

California Must Know Its Oil

The risks facing California are clear and present in a state that has a history of rising to meet its climate challenges. California’s policy leaders in the Administration and Legislature have a plan of action to defend California’s cutting-edge climate and energy policies. But there are important decisions yet to be made regarding oil. The rapidly changing world of oil requires more informed, responsive climate policymaking. There is much more to oil than the petroleum products that fuel cars and trucks. Plastic bottles, jet fuel, roofing materials, and residuals like petroleum coke used to generate power are also made from oil. And, just as the role of oil in our lives is pervasive, so are the potential benefits from greater oil data transparency.

California cannot manage what it does not measure. State policymakers should enhance oil data transparency throughout the oil supply chain. A federal prototype exists. In 2016, Representative Jared Huffman (D-CA) introduced the Know Your Oil Act in Congress (HR 6082), requiring companies to “disclose field-level oil data.” As for identifying responsible parties, a list of all California state oil field operators was compiled here by the Authors on February 1st, 2017 from the DOGGR Well-Finder Database. 

Routine reporting of oil assays to state agencies in an open-source standardized format would apprise CARB on the dynamics of different California crudes to better safeguard public health and guide sound infrastructure permitting. It would help DOGGR and the California Environmental Protection Agency ensure that challenging resources are handled safely. It would also facilitate a more accurate benefits assessment for replacing oil with low-carbon alternative fuels. With representative oil assays, all California oils could be compared using the OCI. And the OCI models could be expanded to include criteria air pollutants, identifying potential co-benefits. The state already collects lifecycle emissions data on biofuels, why not also do so for oil?

Investors, policymakers, regulators, and consumers need to know about California’s oils and their widespread GHG emissions. Such transparency would spur innovation, target policymaking, tighten oversight, and raise consumer awareness. By simply knowing more about its oil, California has an opportunity to further transform a critical sector that must rapidly respond to the realities of a warming world. Other states and nations would again be poised to follow California’s lead—if policymakers rise to meet this challenge.