Can a State Control its Fuel Destiny?

By Jack R. Nerad

With a population and economy as big and vibrant as many countries, the state of California often has displayed a tendency to go its own way. This expresses itself in politics, in fashion and, for decades, in the way the state has dealt with the auto industry. For decades California has been on the leading edge of the anti-smog and higher-fuel economy regulations. Its legislature has enacted statewide requirements for automobiles that have often been more stringent than federal standards, and now several states essentially follow California's lead in this area. As we speak, some vehicles that may be legally sold in most of the U.S. are not legal for sale in California, a situation that drives vehicle manufacturers and consumers alike to distraction.

Now an unofficial but highly influential California-based organization called CalSTEP (California Secure Transportation Energy Partnership) has outlined an agenda that it says will help the state to take immediate steps that will cut its dependence on imported oil while growing jobs and businesses. According to the organization, "The steps tap technologies and solutions available today, including deploying more efficient vehicles, promoting alternative and renewable fuels, and encouraging more energy-efficient planning and development."

CalSTEP's 15-year, still-developing action plan is designed to increase the state's transportation energy efficiency and fuel diversity and cut dependence on what it calls "unstable imported oil." It has developed a short list of near-term actions that can be taken in 2006 to secure the state's transportation energy future. Among them, in the words of CalSTEP, are:

Increase the blending of renewable fuels
California can achieve a near-term and meaningful displacement of fossil fuels with biofuels, such as biodiesel, ethanol, and biomethane. They can be produced in California and used in both low- and high-percentages for on-road transportation purposes, while supporting air quality, health, and economic welfare.

Invest in transportation energy security
The state must increase investment in measures that improve the state's transportation energy efficiency and diversify its fuel supply. Examples include: vehicle incentives; alternative fuel production; research, development, and demonstration; consumer awareness; mass transit and smart growth planning. The state should build on existing precedents that provide funding to improve air quality and generate funds to support renewable electricity generation and efficiency.

Spur state, local, and private fleets
California must lead by example and direct and fund state fleets to purchase and use significantly more efficient vehicles and alternative-fuel vehicles. It can set an example and use the state's economic power to help expand the market for advanced technology alternate-fuel and high-efficiency vehicles.

Use state transportation infrastructure investment to reduce oil consumption
The state is considering a massive new investment of $110 billion to improve roads, infrastructure, and goods movement. Those funds should be used to reward smart growth policies that provide more livable communities and promote transit. The state needs more energy-efficient community design. The state should find ways to ensure that increased goods movement does not increase air pollution or dependence on foreign oil.

Some of the CalSTEP agenda is clear-cut -- for instance, encouraging the purchase of high-fuel-economy vehicles by governmental units. Other aspects are nebulous at best, like investing in energy security. Further, at the core of the issue is how effective one state, even a state as large as California, can be in setting an energy agenda in a nation of 50 states. For instance, unless substantial financial incentives or onerous regulations are put in place to increase the blending of renewable fuels for California, it is doubtful that refiners, distributors, retailers or even the public at large will push for the change, which could prove costly to all parties. And one has to ask the question, as a matter of public policy, do consumers and government desire California fuels, Nevada fuels, Colorado fuels, etc.? Does it make economic sense to have different fuel-specs for individual states when this can present huge hurdles and potential disruptions and shortages in what is a largely national or, at the very least, widely regional market?

On this the jury is still out. But, no matter how laudable the overall goals and how widely based the organization that is putting out the agenda, many believe that the potential Balkanization of U.S. energy policy is a bad thing.

Driving Today Managing Editor Jack R. Nerad has reported on the auto industry for more than 25 years.

Next Feature>>