The clean fuels opportunity

 

A market for low-carbon transportation fuels has a chance to flourish in Oregon if regulators adopt the second phase of the state’s Clean Fuels Program.

 

111014-dirtyfuel

A market for low-carbon transportation fuels has a chance to flourish in Oregon if regulators adopt the second phase of the state’s Clean Fuels Program. But some companies and industry groups are lobbying against the proposed rule. Some argue this opposition puts the opportunity to create jobs and new businesses at risk.

The Department of Environmental Quality (DEQ), the state’s environmental regulator, held a hearing before its board on November 6 to give the public a chance to comment on the proposed regulation. The board plans to decide in early January whether to adopt or reject the draft regulation.

If enacted, the rule would lead to a fledging market for clean fuels produced in Oregon. Holly Stirnkorb, a public policy specialist at Columbia Biogas, a clean energy company, said the program would provide the company with an incentive to keep a proposed new biogas project in the state. The firm plans to break ground in 2015 on the Portland-based facility, which will convert food waste into biogas, a renewable form of energy that can be compressed into a fuel for transportation.

The Clean Fuels Program could also benefit struggling rural economies in Oregon by giving farmers a financial incentive to grow feedstock and convert waste products, such as cow manure, into biogas for the production of renewable fuels. A representative from SeQuential Pacific Biodiesel, an Oregon biodiesel producer, said the program could put the state at the forefront of the clean fuels industry.

The second phase of the Clean Fuels Program would require importers to reduce the carbon content of fuels by 10% over 10 years. The DEQ already requires importers and producers to report the carbon content of the fuels they provide to the state. Regulated parties can comply by incorporating low-carbon biofuels, natural gas, biogas, propane, or electricity into their fuel mix. They can also buy clean fuel credits from providers of low-carbon fuels to meet their targets.

The Oregon legislature passed legislation in 2009 that authorized the Oregon Environmental Quality Commission to adopt rules to reduce greenhouse gas emissions from transportation fuels. The legislation requires the program to expire in 2015. Last year, a majority of legislators voted against the lifting of the program’s sunset, putting an end to the implementation of the second phase of the program. It seemed doomed to failure. But in February this year, Governor John Kitzhaber directed DEQ to draft rules for the program’s next phase. 

What was clear from businesses that commented at the hearing is that providers need a price signal for renewable fuels for them to make the appropriate investments. A case in point is the basket of new alternative fuels that have entered the market in California, which has instituted a low-carbon fuel standard similar to the Clean Fuels Program. Tom Koehler, a representative of Pacific Ethanol, a California-based renewable fuels producer, said Oregon’s proposed regulation would prompt it to invest in the state. “With the right signals, we will do the investments that we did in California,” said Koehler.

Program detractors say there are not enough low-carbon fuels available for regulated parties to meet the standard. Oil companies use this argument to lobby against the proposed regulation. Miles Heller, director of regulatory issues, at Tesoro, said there is only enough ethanol and biodiesel for regulated parties to comply with the standard’s targets for the program’s first three years. “There are not enough fuels available to generate credits to cover deficits,” he said. 

The availability of low-carbon fuels would be tight if the program were implemented and could lead to higher fuel prices. But the high demand for alternative fuels the regulation would create would lead to new supply entering the market, helping to push costs down. This is what happened in the renewable energy market. At one time, solar and wind energy was too expensive to compete with fossil fuel-based energy. But state regulations requiring utilities to obtain a portion of their energy from renewables have created large demand for solar and wind power, helping to bring the cost of these energy sources down. Renewable energy remains an important source of jobs in Oregon.

Kim Moore

Kim Moore is the editor for Oregon Business magazine.

Email This email address is being protected from spambots. You need JavaScript enabled to view it.

Leave a comment

Make sure you enter all the required information, indicated by an asterisk (*). HTML code is not allowed.