By Jodie Muller, Vice President, Government & Regulatory Affairs
Oregon Gov. John Kitzhaber has decided to move forward with development of a Low Carbon Fuel Standard for his state. As an association that represents refiners that supply Oregon the vast majority of its transportation fuels, we think a Low Carbon Fuel Standard is the wrong policy at the wrong time.
Kitzhaber is proposing the state develop a LCFS in two phases – the first a two-year period beginning in 2013 during which fuel providers will be required to report the carbon intensity of their fuels to the state. The second phase, if implemented, will require companies to reduce the carbon intensity of their fuels beginning in 2015. He said the decision to enter into phase two will be made after the state has time to “assess the availability of low carbon fuels, adjust the program as needed to meet legal requirements, prepare for full implementation, and continue to seek public input before fuel suppliers are required to meet the standard.”
Oregon’s proposed program is closely modeled on a similar program in California that recent developments have made clear is not feasible and will significantly increase the cost of providing transportation fuels. Perhaps more troubling is the fact that the future of California’s program is in doubt after a U.S. District Court Judge declared it unconstitutional.
The Governor is calling Oregon’s effort a Clean Fuels Program rather than a Low Carbon Fuel Standard. But a wise man once said, if it looks like a duck, walks like a duck and quacks like a duck – it’s a duck. Changing the name of the program doesn’t change the underlying weaknesses and risks associated with a Low Carbon Fuel Standard.
Even the Governor recognizes those risks. In his letter directing the Department of Environmental Quality to move forward with development of a LCGS, he stated, “we must continue to move deliberately to ensure that the clean fuel standard is implemented in a way that ensures adequate fuel supplies, and that does not cause increases in fuel prices.”
Reducing the carbon intensity of transportation fuels is very complex and requires enormous amounts of low carbon biofuels that are not currently available in sufficient amounts and that, in some instances such as cellulosic ethanol, do not exist at all in commercial quantities. A Low Carbon Fuel Standard for Oregon faces particularly difficult challenges because Oregon receives all of its petroleum-based transportation fuels from refineries outside the state’s jurisdiction. Those out-of-state fuel providers will have to determine if they can afford the extraordinary costs required to comply with a LCFS – up to $42 billion in California alone, according to one study – in order to continue supplying fuel to the state.
Higher costs for energy is a job killers. With an unemployment rate of more than 8.5 percent, Oregon doesn’t need another costly and speculative regulatory program. It needs a strong economy and job growth.
The US Environmental Protection Agency (EPA) has already implemented a nationwide Renewable Fuel Standard program (RFS). This regulatory action establishes annual volumetric requirements for cellulosic, biomass-based diesel, advanced biofuels and other renewable fuels, and, importantly, includes GHG reduction requirements. The federal RFS renders Oregon’s proposed Clean Fuels Program duplicative and unnecessary.
Key stakeholders in the labor, transportation, construction, trucking and other sectors are mobilizing to combat this ill-advised policy and continue to push back on the rule-making process reiterating that the LCFS could increase fuel prices, force job losses and hurt the economy.
Please stay in touch with this issue. Programs that sound nice but have a whole host of unintended negative consequences have a way of becoming law unless every day citizens let legislators and other state officials know they are watching them. Keep watching them and let your voice by heard.