http://www.sacbee.com/news/business/article10703354.html
Oil industry takes aim at California’s war on carbon
By Dale Kasler
02/19/2015 10:31 PM
California’s effort to combat climate change was subjected to a fresh
round of scrutiny Thursday as oil-industry representatives urged
regulators to ease off on the state’s “low carbon fuel standard,” a
centerpiece of the effort to rein in greenhouse gases.
A California Air Resources Board hearing on whether to renew the
standard, known as LCFS, turned into a three-hour debate on whether the
regulation is workable or effective. Environmentalists and executives
who produce ethanol, biodiesel and other alternative fuels urged the
agency to stay the course and keep the standard intact, saying it has
helped usher in a new generation of greener products.
Oil-industry executives countered that the LCFS is unrealistic and must
be adjusted.
Nick Economides, manager of state fuels regulation at Chevron Corp.,
said the Air Resources Board must move away from its “strategy of
higher-than-achievable goals.” He said it relies heavily on the
development of alternative fuels, many of which haven’t yet panned out.
“We have invested heavily (in alternative fuels) and regretfully, we
have not been successful,” he said.
The agency is expected to make a final decision during the spring or summer.
The LCFS originally took effect five years ago. It’s coming up for
renewal as public debate intensifies over California’s climate-change
law, Assembly Bill 32. The state’s cap-and-trade program, which puts a
price on the right to emit greenhouse gases, was broadened in January to
include motor vehicles. That resulted in an increase of several cents a
gallon in gas prices shortly after New Year’s Day.
The LCFS targets greenhouse gases from a different angle. It requires
producers of transportation fuels to reduce the “carbon intensity” of
their products by 10 percent by 2020. Carbon intensity doesn’t just
measure the carbon coming out of tailpipes; it takes into account the
process of manufacturing and distributing the fuels. That includes, for
example, the amount of carbon released into the air when corn is planted
to create feedstock for ethanol, as well as the greenhouse gases
generated when a refinery turns crude oil into gasoline.
While not as well known as cap and trade, the LCFS is highly
controversial among those who work in the fuel business. It is up for
renewal because the 5th District Court of Appeal ruled in 2013 that the
Air Resources Board violated provisions of the California Environmental
Quality Act when it adopted the LCFS in 2009. The court didn’t throw the
standard out but told the agency to redo the necessary environmental
reviews and then vote whether to renew it. The agency also is proposing
to revise some of the computer models used to measure the carbon
intensity of various fuels.
It seemed clear Thursday that – regardless of industry complaints – the
Air Resources Board will renew the standard later this year. A staff
report to the board said the LCFS will eliminate an estimated 35 million
tons of carbon between 2016 and 2020. Board Chairwoman Mary Nichols said
the regulations “have all been working quite well despite the efforts
over the years to undermine ... this rule.”
Board member Daniel Sperling, a transportation professor at UC Davis who
helped conceive of the LCFS, said he understands why the petroleum
industry chafes against the regulation.
“We’re telling them, ‘We want you to change your business model and your
main product,’” Sperling said. “I can sympathize with the oil industry.”
A string of environmentalists and alternative-fuels providers chimed in
with support for the standard. The LCFS works on market principles; fuel
producers that surpass the standard are awarded credits, which they can
sell to companies struggling to comply with the rules. The credits,
currently worth around $25 per ton of carbon, have created financial
incentives that are helping fledgling industries like biodiesel expand.
“Ten years ago, you were buying biodiesel by the jar,” said Shelby Neal
of the National Biodiesel Board, a trade association. Now the industry
is creating 1.4 billion gallons a year of the low-carbon fuel.
“We’re here today, and we’re affordable,” Neal told the agency.
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