As part of a story I wrote a couple of weeks back on Prop 23, I looked briefly at the story from the perspective of Valero, the Texas oil company that has poured millions — five million, to be precise — into the initiative, which is intended to gut AB 32, California's Global Warming Solutions Act.

I wanted to try and understand why Valero backed the proposition, and why Chevron (and other oil companies with big operations in California, such as Shell and Exxon) had not.

This proved to be much more difficult than one might imagine, because oil company annual reports are eye-glazing, and — more importantly — because people in the oil business were reluctant to talk.

Despite repeated attempts, Chevron never returned my calls, for example. Valero did, but stuck relentlessly to their talking points, insisting it was all about the recession and jobs. But it became clear from looking at their annual reports, and from talking to experts at the Energy Information Administration, and players such as Fran Pavley, who drafted AB 32, as well as advocates at the Sierra Club and other non-profits, that not all oil companies are opposed to AB 32…only the refiners.

In the Los Angeles Times today, Chevron ran several large ads touting their work in renewable energy and in charity — implicitly saying that Chevron thinks it can succeed under AB 32 just fine.

Which returns us to the question: What was motivating Valero?

In today's paper, in the business section, an excellent story by the Times' climate change reporter, Margot Roosevelt, did look at the initiative from Valero's perspective. Evidently Chevron wouldn't talk to her either, but she cobbled together facts from what Valero reported to business analysts to get to the truth.

Here's the crux: 

First, Valero emits almost a million tons of CO2 a year just from its plant near Long Beach. This was omitted from the on-line version of the story, unfortunately, but here's the fact from the print edition:

For decades California authorities have have regulated the plant's air pollution, water pollution and hazardous waste, including such health-damaging substances such as nitrogen oxides and sulfur oxides, along with toxic soot known as particulates. Now California is taking aim at the plant's 951,913 tons of carbon dioxide.

To reduce these emissions of CO2 will cost the company big bucks:

In fighting AB 32, Valero officials had suggested in the past that the cost of complying with the law could total $170 million a year for its two California refineries, in Wilmington and Benicia. But in the conference call with [financial] analysts, Valero acknowledged that the annual cost might be closer to $80 million.

And, as an expert at the EIA told me, because Valero doesn't drill for oil — although it does harvest oil from Canadian tar sands, and has invested in ethanol — it can't absord refinery costs as the giants can.

Unlike integrated oil companies such as Chevron Corp., Royal Dutch Shell and Exxon, which drill and distribute crude oil as well as refine it, independents such as Valero and Tesoro cannot spread costs across other operations.Through the first nine months of 2010, Valero has posted a profit of $762 million on revenue of $63.6 billion, after two calendar years of losses.

So a one-time investment of $5 million, versus $80 million to comply?

A drop in the bucket.

[pic of Valero's Wilmington refinery, from the story]

Note to reporter self: Next time you need facts on a business, go to business analysts.