With ‘yes’ vote, Ore. environment department moves clean fuels program forward 

Source: Nathanael Massey, E&E reporter • Posted: Friday, January 9, 2015

Rules mandating a 10 percent carbon cut from gasoline and diesel took a step forward in Oregon yesterday as the state’s Environmental Quality Commission voted to approve a program long championed by Gov. John Kitzhaber (D).

In a 4-1 vote, the commission approved operating rules for the state’s Clean Fuels Program, which aims to reduce the greenhouse gas footprint of the transportation sector. A sunset clause in the rule would see the program end in December, but the vote opens the door for policymakers to extend the program during the 2015 legislative session.

“I believe in the goal of carbon reduction, and I also believe in the role of market transformation,” said Commissioner Melinda Eden, speaking shortly after the vote. “I feel comforted that there’s flexibility in this program and enough commission oversight” to guarantee its operation.

Commission Chairwoman Jane O’Keeffe was the lone opposing vote, citing the rule’s potential impact on vulnerable communities in her dissent.

The vote paves the way for phase two of a program first launched in 2009, which required companies in Oregon to report the carbon emissions associated with their fuels. Legislative approval of the second phase will mean those same companies will begin the process of reining in their emissions to approved levels.

An earlier bill to extend the program failed in the Senate in 2013, with one Democrat voting alongside Republicans in a tie against an extension of the sunset clause. At the time, Kitzhaber chose to move the fuel standard forward himself, ordering the Department of Environmental Quality to begin crafting rules to implement the program.

He has since named the measure his top legislative priority for 2015.

Mixed messages from business

Democrats’ prospects of setting phase two in motion improved in November of last year, as midterm victories tipped the Senate to a 18-to-12 majority in Democrats’ favor. The House rests in Democratic hands with a 35-to-25 majority.

Low-carbon fuels are a growing commodity on the West Coast, where California and the Canadian province of British Columbia already have programs in motion. Along with Washington state, Oregon, California and British Columbia have partnered under a regional framework to lower their collective greenhouse gas emissions from all sectors of their economies, including transportation.

Under Oregon’s program, roughly 90 companies, including those that import gasoline and diesel fuel to the state, would be required to reduce the carbon intensity of their products over the next decade. The measure is expected to lower transportation sector emissions by 10 percent and reduce the state’s overall greenhouse gas footprint by around 3 percent.

Participating companies can comply by blending biofuels into their products or by purchasing offset credits from suppliers that produce low-carbon fuel. The measure is meant to encourage alternative fuels and accompanying industries from within the state in areas like ethanol, biogas and electric vehicles.

The fuel standard has met stiff opposition from oil companies, trucking associations, farmers and other fuel-intensive operations that worry it will drive up prices at the pump. In testimony filed with the Environmental Quality Commission, the Western States Petroleum Association — which has been leading the push against the standard — argues that the biofuels needed to comply are not yet available on a commercial scale in Oregon, and that similar programs are already boosting the price of gas in neighboring California.

But others in the Oregon business community back the measure. Tesla Motors, DuPont and gas company NW Natural have all come out in favor of a low-carbon standard, along with the Oregon Business Association.

Building off suggestions from its supporters, the measure voted through yesterday includes cost-containment mechanisms geared toward heading off price increases for consumers. Carbon reduction goals can be deferred if there is a shortfall in low-carbon fuels or if fuel costs rise significantly more than anticipated under the program.