Help for Schwarzenegger ally tucked into budget at last minute

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A last-minute budget concession is heading to a struggling business founded by a political ally and generous campaign contributor to Gov. Arnold Schwarzenegger.

Pacific Ethanol, a firm founded by state Republican Party fixture Bill Jones, would be relieved of a requirement to meet strict environmental standards by a change quietly inserted into budget legislation Wednesday.

Jones is the former California secretary of state and was the Republican candidate for U.S. Senate in 2006. Jones and Schwarzenegger have endorsed each other’s campaigns over the years, and Jones has given nearly $70,000 to Schwarzenegger’s political committees, state records show.

In August, the Schwarzenegger administration promised millions in subsidies that helped rescue Pacific Ethanol from bankruptcy. Part of the deal was that the firm, which uses corn to make the gasoline additive ethanol, would significantly reduce its carbon footprint within four years.

But a last-minute change to the statute allows the carbon reduction requirement to expire in two years, essentially letting Pacific Ethanol, and three smaller firms that qualify for the subsidy, off the hook.

Administration officials acknowledged Thursday that the change had been made, arguing that it gives the next governor, future legislators and Energy Commission regulators more flexibility. Gubernatorial spokesman Aaron McLear would not comment on who suggested the change. [Updated 4:11 p.m. McLear later said the change was suggested by Senate Democrats.]

[Updated 6:22 p.m. McLear corrected himself, saying it was the Assembly Democrats, not Senate Democrats, who suggested the change.

Shannon Murphy, spokeswoman for Assembly Speaker John Pérez (D-Los Angeles), said: “I can tell you emphatically that any assertion this was the speaker’s idea is laughable.” She added that whenever her office got calls about the subject they “came from the administration.”]

Such flexibility is exactly what concerns former Assembly Speaker Fabian Nuñez, who wrote the original bill that raised car registration fees to create the Alternative Fuel and Vehicle Technology Program, the source of the subsidy. ‘When you eliminate law, and leave it up to a regulatory agency to do whatever they want, you take all the teeth out of it,’ Nuñez said.

Many environmental scientists oppose subsidizing corn ethanol because they say clearing fields to grow the corn, harvesting it, distilling it into ethanol and shipping it to oil refineries creates as much environmental damage as burning oil. Several members on the committee that approves expenditures from the Alternative Fuel Fund said they agreed to the corn ethanol subsidy because of the clause guaranteeing producers would become more environmentally friendly.

Tom Koehler, Pacific Ethanol’s director of public policy, said Thursday that he had not heard about the change.

--Jack Dolan in Sacramento