Oil Industry Challenge To Oregon LCFS Targets Rule Approval Process

Source: By Inside EPA • Posted: Tuesday, March 24, 2015

The Western States Petroleum Association (WSPA) is challenging rules Oregon officials developed earlier this year to implement its low-carbon fuel standard (LCFS), filing an appeal about a week before Gov. Kate Brown (D) signed legislation authorizing the expansion of the program and allowing it to link to a broader regional LCFS market.

The industry group March 6 filed a petition for judicial review with the state’s Court of Appeals, challenging the rule development and approval process carried out by the Oregon Department of Environmental Quality (DEQ) and Oregon Environmental Quality Commission, which adopted final rules on Jan. 7.

The new Oregon rules extend the state’s existing “clean fuels” reporting regulation to require fuel providers to reduce the lifecycle greenhouse gas (GHG) emissions from gasoline, diesel and substitute fuels by an average of at least 10 percent below 2010 levels by 2025, targets that refiners will meet in part by blending volumes of low-carbon biofuels into gasoline.

While the rules went into effect Feb. 1, regulators would not have been able to implement the program unless the state legislature approved a bill that extended the program beyond its Dec. 31, 2015, sunset.

Lawmakers approved such a bill last month and Brown signed it earlier this month.

While the rules still face a legal challenge, the program’s authorization will help the state make good on its commitment to create a West Coast low-carbon fuel program. California, Oregon and Washington, along with British Columbia, in 2013 created the “Pacific Coast Collaborative,” agreeing to an “action plan” to reduce GHGs and promote clean energy.

The non-binding agreement in part commits the jurisdictions to implementing and maintaining separate LCFS programs. That is significant because it would expand California’s low-carbon fuel market and provide producers of low-carbon biofuels additional support given uncertainties with EPA’s renewable fuels standard (RFS), which sets annual volumetric blend mandates for low-carbon biofuels.

But WSPA is now suing over the Oregon rules, with a source indicating that its challenge “will be argued exclusively on the record” compiled during the DEQ and environmental quality commission’s development of the new “phase 2” LCFS rules approved in January. Essentially, the industry group is “appealing the regulatory process by which it was approved,” the WSPA source says.

The next step in the challenge is “certifying the record,” the WSPA source adds. “How long that takes depends on” the state’s response.

In a March 6 press statement, WSPA President Catherine Reheis-Boyd says the group is asking the Court of Appeals to “recognize the fundamental flaws in the LCFS rules and hold the rules invalid.”

The LCFS rules “force producers to meet carbon-intensity targets, and/or purchase credits, at a time when alternatives are not available,” Reheis-Boyd adds. “Many studies have been produced suggesting alternatives will not be scalable for some time. Furthermore, Oregon’s LCFS is far too intrusive in a market that is almost entirely dependent on out-of-state fuel sources, making the outcomes of the newly adopted rule hard to foresee.”

In general, WSPA opposes the Oregon LCFS because the organization believes that there will not be an adequate supply of low-carbon biofuels to meet the standard’s compliance requirements. WSPA has for the same reason long opposed California’s LCFS, which requires a 10 percent reduction in the carbon intensity of gasoline and diesel by the end of 2020, based on a 2010 baseline.

“When you increase the demand for fuels that either don’t exist or exist in inadequate supplies by adopting similar regulations in other states, you only magnify problems and potential impacts on the marketplace,” the WSPA source says.