This Wednesday, (August 02, 2006) The Wall Street Journal ran a front page center article titled: "How California Failed in Efforts To Curb Its Addiction to Oil." The pre-headline billed the article as a "reality check".

The article follows the history of California's ongoing attempts to clean up its air, lead the way in alternative energies and be a catalyst in the development of new energy technologies. The article's premise is that based on empirical data, California has failed and the reason for its failure is that oil and automotive companies haven't received the proper state subsidies to create viable alternatives.

Wow, this is journalistic spin at its best. It's no secret that the WSJ is a pro-business, anti-tax newspaper, almost invariably siding solely with the profit interests of corporations.

Let's see if we can give both sides of this issue. Let's start with the idea of state subsidies to energy and automotive companies. The "other side" would call that "corporate welfare". Over the past 25 years, I hardly think it would have been necessary to give state "subsidies" to extremely profitable industries.

The article also conveniently forgets to mention that California gave extremely generous tax credits to wind and solar energy entrepreneurs that were the darling of WSJ investors (read: tax shelters) in the early 1980s. In fact, without those "subsidies" we wouldn't have the advanced wind and solar technologies that are on the cusp of viable mainstream use today.

Fact: California is the world's sixth largest economy.

Fact: Ninety-nine percent of California's cars and trucks still run on petroleum products.

WSJ Conclusion: California's energy policies have failed.

I find this to be breathtakingly simplistic give the complex social, economic, technological and environmental issues involved here. It also doesn't give any column space to the significant increase in California's population during the past 25 years that have led to urban sprawl, increased traffic on aging and failing public infrastructure and increased property values that in turn forced many in the work force to outer suburbs that required increased commute time.

And then let's not forget the resistance from the auto manufacturers, oil companies and their repeated efforts to block California's policies with lawsuits, backroom deals with public officials, ballot initiates, and flat-out lack of interest in helping our country to alternative fuels. The cynical attitudes of oil executives and the knowledge that big energy utilities and oil companies have known for decades that fossil fuels like oil and natural gas would likely run out over the next half century is also a bit frustrating.

Fact: California's energy policies have tried to give life to alternative fuels such as natural gas, methanol, electricity and hydrogen.

WSJ Conclusion: None have hit the road in any significant way.

The article quotes James Boyd, a long-time California employee who now is the vice chairman of the California Energy Commission. Mr. Boyd states that presidents since Richard Nixon have called for energy diversity. But he laments that "we've never had a serious effort."

He's right. We've never had a president that has led a push to diversify the way we create or use energy. As recently as 2006, President Bush declared that we are a country "addicted to oil". Duh. But President Bush hasn't called for a massive overhaul of our energy policies. Rather, there are calls for driving less and conserving fuel. And of course drilling for more oil in protected wildlife areas is always a popular idea on Capital Hill. Our Vice President calls conservation a "personal virtue". Why have a government at all?

Congress has passed tax breaks (read: corporate welfare) for automakers to produce flex fuel vehicles that can run on E85, a mix of 85% ethanol and 15% gasoline. This all sounds nice, but it's really allowed the big truck and SUV makers in Detroit to sell more and bigger polluting vehicles because they get a break in Corporate Average Fuel Economy (CAFÉ) regulations. (For the record, I'm in favor of ditching the CAFÉ regulations.) It also helps the big corn farmers (think ADM -- Archer Daniels Midland) by requiring the use of corn-based ethanol blended into gasoline.

And none of this has benefited California because the major oil companies have balked at installing any ethanol infrastructure. To date, the only public E85 gas pump is in northern San Diego County. There isn't a single public pump in Los Angeles or SF or even in the heart of California's central valley where many trucks could use E85. Then there is the problem that E85 doesn't burn as efficiently as gasoline, so you burn more E85 (40% more) to go the same distance on a gallon of gasoline. As such, the smaller price you might pay for E85 is lost because you have to use more of it!

So let's get it straight -- California hasn't been pushing E85 because it's not as efficient as gasoline plus no major oil company wants to produce E85 because it uses less of its main product (gasoline) and it's not profitable to put up the public infrastructure necessary to deliver E85. However, federal energy policy favors E85 because it helps GM, Ford and Dodge skirt some CAFÉ standards and puts more money in the pockets of the big agriculture corporations.

Fact: California has used its all-important car market to push for cleaner fuels, and cleaner-burning internal combustion engines in a hope for more alternative energy cars and trucks.

Fact: Twenty-six million vehicles are registered in California that run on gasoline or diesel. Only 250,756 flex-fuel -- E85 -- vehicles are registered in California; however given that there is only one filling station at Pearson Ford in San Diego, the vast majority of these cars and trucks don't use E85. And only 88,887 hybrids and alternative fuel vehicles (electric, natural gas and fuel cell) are registered in California.

Fact: Since 1980, average daily miles traveled have increased 124.3% in California. Total vehicles on the road have increased 105.1%. Fuel use has increased by 57.8%.

WSJ Conclusion: Since none of the desired alternative fuels -- electric, natural gas, M85 (methanol 85%, gasoline 15%), E85 (ethanol 85%, gasoline 15%), fuel cells, hydrogen and gas-electric hybrids -- have caught on in a "significant" way, California is nowhere nearer to its goals of alternative fuel vehicles than it was 25 years ago.

It depends on how you spin "significant". In pure total impact, it is insignificant. However in the hearts and minds of the public, it's not insignificant. It's a start on something that is an ongoing process.

The article gives a nod to California for significant increases in fuel economy.

So although the numbers of vehicles have more than doubled, it's good to know that the new vehicles are significantly more efficient. But if not for California's rules and regulations, I doubt we would have had the technological improvements and breakthroughs that would have led to this increase in efficiency coupled with significant decreases in sulfur oxides (-92.7%), nitrogen oxides (-43.2%) and carbon monoxide (-67%). Carbon dioxide emissions have increased by 17.3%; however, I believe these are pretty commendable results given the huge increase in California's total population and car/truck purchases.

It's established fact (missing from this article) that GM, Toyota and Honda (and others) began developing battery and hybrid technology in advance of California's requirement that 10% of all cars to be sold in California had to be "zero emissions vehicles" (ZEV) by 2003. It's also established fact that the auto manufacturers sued California to relax the rules and California ended up loosening its rules and removing the 10% ZEV 2003 requirement.

GM, Honda and Toyota all introduced all-electric vehicles in the 1990s. And I believe Ford had an electric Ranger small pickup truck, but we didn't see those here in LA. GM's EV-1 was an odd-looking little car, but it was much loved by the few people who got their hands on one -- and much lamented that GM destroyed the cars. Honda had a special-purpose EV that looked like a fat Civic and Toyota introduced an EV version of its first-generation RAV4 small SUV. GM and Honda only leased their cars and at the end of the leases, the cars were required to be returned. The few privately-owned Toyotas are now highly coveted vehicles that sell for unreasonably-high prices to people in California who don't buy it to save money, but to make a statement of independence from gasoline.

The current hybrid-electric technology sold by Toyota, Honda and Ford in the US was a direct result of the scramble in the 1990s to make electric cars. Battery technology is much further advanced than10 years ago because of this. Small startup companies are just beginning to market small-volume electric cars -- both all-new and converted existing cars.

Solar and nano technology are merging into more commercially affordable and viable applications. Battery and nano technology are merging into more efficient batteries that will allow plug-in hybrids, faster charging and eventual full EV operations with a much longer range than current EVs.

There is also a California-based nonprofit company that has developed a way to make the Toyota Prius a plug-in hybrid. By adding more batteries and some tweaks to the Prius' operating software, you can get decent range on all-electric mode and the car plugs in to your standard house socket to recharge overnight. Yes, the technology is expensive, but all this is done in the hopes that a bigger company (like Toyota) will decide to adopt and spread the technology at a significantly lower cost.

If not for California's environmental activism, I doubt we would have many of these promising technologies today and we'd have much more air pollution.

Fact: GM wants to push its E85 vehicles particularly in California. GM approached the California EPA and proposed an E85 demonstration in partnership with Chevron, which is still based in California. Chevron was reluctant to make an investment in ethanol infrastructure because it didn't believe it would be profitable.

WSJ's Conclusion: California's spotty past experiences with M85 and EVs is sufficient to justify Chevron's response to GM's proposal. The WSJ didn't seem to have a problem with Chevron's rejection of the scope of the project was solely because the executives at Chevron didn't think it would be profitable.

GM's proposed demonstration never happened because of the differences between GM and Chevron. GM wanted more fueling stations and Chevron, predictably, wanted fewer. It came down to the chicken-egg question. If Chevron builds the stations, will customers come to them to make them profitable? GM promises to bring vehicles and customers to the station, but that can't happen without the fueling stations! Why invest in the infrastructure for a fuel that uses 85% less of its primary fuel: gasoline? Keep reading, there is a good reason for Chevron to make the investment.

The WSJ doesn't stop to think about the indirect and non-economic social issues involved in California. The WSJ clearly points out that California accounts for 26% of all hybrids sold in the US. But they are quicker to point out that those vehicles are statistically insignificant in the big picture of things. They are right, but it's not always about the actual effect, it's about the bigger social aspect of the "green" cause. Everyone associates Toyota with being the "greenest" car company in the US. That may not be true, but people believe it.

Instead of focusing purely on hard dollar costs and bottom line results, focusing on more "fuzzy" issues like public perception and the value of investing in infrastructure can go much farther than the actual dollars expended. It would be a drop in the bucket for Chevron-Texaco, Exxon-Mobile or BP/Arco to throw a few hundred million (not chump change -- I agree) to build some of these more advanced fueling stations in areas that could most use them. They can start with LA, SF, Sacramento and Modesto. And then grow to strategic areas and cities some of which would cater to contractors, and agriculture and other heavy users of flex-fuel trucks and SUVs made by GM, Ford and Dodge. The more urban areas could cater more to daily commuters in cars and contractors driving trucks.

In fact, I'd bet that they could and would write off these costs as marketing costs. And if you abate the state and federal gas/highway taxes at the pump, it could go a long way to making up for the 60%-of-gasoline efficiency deficit.

Business as Usual

Unfortunately for big energy companies, it's business as usual. Why do anything unless there is a corporate welfare tax break, government hand out or high profit to be made? Perhaps it's just investing in the future -- even though we all know that neither E85 vehicles or gas-electric hybrids are the panacea for our nation's (or California's) energy problems. I think the public notices and votes with their consumer dollars when they see a company -- whether it's Toyota, GM or Chevron -- do something that at least is a step in the right direction and that shows some sort of commitment to the future of the planet and public health.

If you need some economic incentive, why not just look at the July auto sales figures. Toyota and Honda had a great sales month. Toyota outsold Ford. Honda outsold Chrysler. If you ask any average person on the street which car companies have the most economical cars, the answers would overwhelmingly be Toyota and Honda. Who even remembers that Chevy sells the economical Aveo? And in California, E85 is merely something they've seen in some TV ad or billboard. It's not reality.

Ask the same person about their perception of the oil companies, and you probably won't find one person who equates Chevron-Texaco or Exxon-Mobile with the words "cares about the environment" or "good corporate citizen".

Intangible benefits with public perception may not be measurable on a pie chart of graph but those benefits are very real and can contribute to any corporation's bottom line -- you just need forward-thinking newspapers to point that out and the same forward-thinking executives to see beyond the initial cost of any new program or technology. Players in the game get rewarded!