Shifting politics imperil regional push for low-carbon fuel standard

Source: Jason Plautz • E&E  • Posted: Wednesday, February 22, 2012

The 2010 Republican landslide that swept Democrats out of office in 2010 may soon claim another victim.

On the ropes: Northeastern states’ push to promote gasoline, diesel and biofuels with low emissions of greenhouse gases.

Northeast States for Coordinated Air Use Management’s low-carbon fuel standard was approved by 11 governors in 2009. But seven of the 11 governors are now gone — including three Democrats who have been replaced by Republicans (two states replaced Republicans with Democrats) — and with them could have gone the enthusiasm for the clean fuel standard.

Maine Gov. Paul LePage (R), for example, announced in December that his state program would not be moving forward on the fuel initiative. There’s legislation pending that would take New Hampshire out of the standard, and several other states are said to be considering exits. And New Jersey, which saw conservative Republican Chris Christie replace Democrat Jon Corzine, has also come out against a version of the program.

Oil and gas interests oppose the fuel standard, which they say will raise gasoline and diesel prices. They’re encouraged by recent developments in the Northeast and a pending legal challenge to a similar effort in California.

If some states don’t sign, it’s very difficult for a core group of states … to say, ‘We’re going to do our own fuel pool,'” said Michael Whatley, vice president of the Consumer Energy Alliance, which is backed by the petroleum industry. “It still could happen, and nobody’s sure exactly where it’s going to go. But I’m pleased with where the discussion is going in the states at this point.”

Northeast States for Coordinated Air Use Management (NESCAUM) would require companies that import or use fuel to reduce the carbon intensity of transportation fuels by 5 to 15 percent over 10 to 15 years. There could also be a credit system to promote the use of biofuels, electricity, hydrogen fuel cells or natural gas for transportation.

Governors who signed the 2009 NESCAUM memorandum of understanding agreed that the program “has the potential to provide economic and energy security benefits by promoting the manufacture of low-carbon fuels from domestic resources.” According to an economic analysis released by NESCAUM last fall, the program could reduce carbon emissions by up to 9 percent by 2022, while slashing oil consumption by as much as 8.7 billion gallons a year.

The analysis also stated that incentives to grow the clean fuels industry, combined with a reduction in imports of petroleum and diesel, could provide a regional economic boost of between $17.1 billion and $28.7 billion (Greenwire, Aug. 17, 2011).

“We can stay on the petroleum roller coaster and be beholden to one fuel, or we can get on the track to a fuel standard,” said Jeremy McDiarmid, Massachusetts director of the nonprofit Environment Northeast. “At the end of the day, the prize is a number of low-carbon fuel choices that reduce oil consumption, reduce emissions and keep more of our energy dollars at home.”

So far, the member states have developed a basic framework for the program and an economic analysis. Next up, members say, is a review of possible scenarios and a model rule that will be vetted by the member states. The model rule is expected to be released later this year. In the meantime, members must determine everything from how fuels will be treated in a credit system to how to account for upstream emissions.

But how far can the program go?

Some observers compare the low-carbon fuel effort to the Regional Greenhouse Gas Initiative (RGGI), a 10-state emissions reduction scheme. That program was dealt a blow when Christie announced New Jersey was pulling out.

New Jersey may be eyeing a similar exit from the fuel program.

Cap and trade

Michele Siekerka, the assistant commissioner of water resource management for New Jersey’s Department of Environment Protection, said the Christie administration wasn’t interested in pursuing a debit/credit program like the one that had been discussed. But she said New Jersey was continuing its work on alternatives assessments with the other member states and planned to continue on the program if a new approach could be found.

Maine, however, will be pulling out of the program under a declaration by the state’s Department of Environmental Protection commissioner, Patricia Aho, late last year.

And New Hampshire could follow, if a bill barring any state progress on the regional program passes the Republican-controlled state Legislature. However, Gov. John Lynch (D) signed the original memorandum of understanding and recently vetoed a Legislature attempt to withdraw the state from RGGI, so it’s likely he will nix the bill if it is passed.

According to Whatley, whose group has been reaching out to governors across the region, other states, including Pennsylvania, have considered pulling out as well. The loss of a few members, he added, could be disastrous for the program because it could isolate some states with a mandate for fuels that are not being sold in neighboring areas.

“Once you explain that this is a cap-and-trade program for transportation fuels and that NESCAUM have described this as a RGGI-type program, it’s not surprising that a number of states … are not going to be real supportive,” Whatley said.

Even environmentalists concede that the Republican wave that turned over many of the original low-carbon fuel standard supporters could set back the program, although they’re urging caution on any declarations until the final standard is released. Much like RGGI, the low-carbon fuel standard could be another chance for Republican governors to take a stand against an environmental policy.

“When you get a Republican governor coming in, he’s more likely to be negative about any climate change initiative,” said Richard Ottinger, dean emeritus of the Pace University Law School and founder of the school’s Energy and Climate Center.

“There’s a major Republican effort which [many of] the presidential candidates seem to have adopted that environmental regulations are an impediment to jobs and business. That position is clearly going to make it difficult to get any kind of endorsement of climate change activity.”

Calif. challenges

Low-carbon fuel standard programs were also being explored in a few Northwestern states and in the Midwest. And there has been talk of a national standard — President Obama has endorsed a federal low-carbon fuel program — but an official proposal has not been released.

But when four of 10 governor’s mansions went from Democratic to Republican in 2010, the Midwestern Governors Association was prompted to scrap its work on a low-carbon fuel standard. And work in the Northwest has also been put on hold.

But the biggest hurdle for the fuel standard is legislation in California that could put an end to that state’s program, the first in the country.

Oil and gas companies challenged the California mandate — which would lower the carbon content of the state’s fuels by 10 percent by 2020 — because they said it violated the U.S. Constitution’s Commerce Clause by discriminating against interstate trade.

“From our perspective, it’s good because the California model is one we’ve been very strongly against since day one,” Whatley said. “It took a judge brave enough to say, ‘This is unconstitutional,’ and strike it down.”

Environmental groups see things differently. Though he acknowledged that the California court ruling could pose a challenge to progress in the Northeast, Environment Northeast’s McDiarmid said there could be a silver lining in the litigation.

It’s important “to remember that this is a California-specific regulation that had unique aspects about it that were called into question,” McDiarmid said. “In the Northeast, the final regulation has not been written. There’s nothing etched in stone, so you can take [California] into account and look at what the court said. You can see if there are ways to design a Northeast and mid-Atlantic policy that preserves the policy of science.”