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Low-Carbon Fuels Debate Fires Up in Washington, Oregon Legislatures

The Legislatures of Washington and Oregon have been polarized in recent weeks by debate over low-carbon fuels standards, which is either a key means of cutting greenhouse gas emissions to combat global warming, or a boondoggle-in-waiting that will jack up fuel prices for marginal environmental benefit. There’s very little middle ground in between the two sides.

In Oregon on Wednesday, the House of Representatives passed legislation by a 31-29 vote that would finally implement its fuels standard – the Legislature created it in 2009, but it’s been in a planning period since and is set to expire in July. It now heads to new Gov. Kate Brown for a signature, and she has spoken favorably of it in the last month but is still weighing whether to sign it, according to Oregon media reports.

In Washington, the fuel standard flew under the radar for the first six weeks of the legislative session before popping up in a big way in the transportation package that passed the Republican-held Senate on a bipartisan vote on Monday. Senate Republicans included a provision in the package that would divert transit funding to roads projects if Gov. Jay Inslee moves forward with implementing a low-carbon fuel standard by executive order.

‘POISON PILL’ OR CONSUMER PROTECTION?

That provision, called a “poison pill” by some Democratic Senators, passed out of Senate included in the package’s revenue bill on Monday by a 27-22 vote. It now moves to the House. A low carbon fuel standard mandates that refiners mix gasoline products with cleaner, advanced kinds of ethanol that don’t create as much carbon when burned. Otherwise they’d have to purchase credits from renewable energy producers.

Oregon Republicans are trying a similar tactic, pulling out of negotiations over a gasoline-tax increase to fund transportation projects in that state unless the low-carbon fuel standard is scuttled. Oregon requires a two-thirds majority for a tax increase, and Democrats lack the necessary majority to pass it without at least one Republican vote, according to the Salem Statesman-Journal.

Republican Senators such as Senate Majority Leader Mark Schoesler, R-Ritzville, and Sen. Curtis King, R-Yakima and the Chair of the Transportation Committee, have called the provision the low-carbon fuel standard a “consumer protection” to keep them from seeing further increases in price beyond a gas tax increase.

A standard for Washington could begin by 2017, according to the Department of Ecology, and would gradually lower the average carbon intensity of fuels by 10 percent by 2027. Ecology circulated a “draft discussion” document last month of a potential rule that would implement the standard for feedback, but has not started the formal rule making process.

CALIFORNIA’S EXPERIENCE

That’s a similar target to what California set out to meet in 2010, when it was the first state to implement a low-carbon fuel standard. Almost halfway through the decade, it’s struggled to take hold and is now extending out the timeframe to meet the steeper reductions required. It was challenged in court, and after being upheld legally, a judge found that it needed to be re-adopted, which is taking place this year.

Oil companies and biofuels manufacturers have been the source of lawsuits challenging the fuels standards, with biofuels companies arguing the policy illegally closed off the state’s markets to out-of-state producers. Much of the U.S. biofuels manufacturing is sourced to the Midwest and corn-based ethanol, and they argue the standard imposes an illegal burden because it slaps a greenhouse gas emissions penalty to account for the carbon emissions created in transport. Corn-based ethanol also has a greater carbon intensity than other advanced forms of ethanol produced within California.

The California Air Resources Board largely prevailed in the legal challenges, but corn-based ethanol companies are threatening more legal challenges that would waylay the low-carbon fuel standard further. It’s prompted U.S. Sen. Dianne Feinstein, D-Calif., and other Senators to introduce legislation in Congress last month that would shut down the federal subsidies for corn production that the Midwest ethanol companies have come to rely on.

Given that tangled history, opponents of low-carbon fuel standards in Washington and Oregon are asking why it’s worth the trouble.

“This is a very costly way to go about improving carbon emissions,” said Larry Pursley, a lobbyist for the Washington Trucking Association. “We’re discussing a transportation package that could potentially cost less than a low-carbon fuel standard.”

SUPPORTERS EYE CARBON REDUCTIONS

But the standard’s supporters, including Inslee and a host of environmental groups, have argued that the cost concerns are overblown. Inslee’s administration has been studying a low-carbon fuels standard for Washington in recent years, and the Office of Financial Management commissioned a consultant’s report that was released fall and found a low-carbon fuel standard could be feasible in Washington state, given the right design that would avoid California’s pitfalls. An economic analysis said the standard would lead to only a per-gallon price increase of only a few cents; the transportation sector accounts for approximately half of Washington’s total carbon emissions.

Opponents balked at that conclusion, arguing it would be higher and thus more economically harmful. Further, they call the standard a “hidden gas tax” – a price driver that doesn’t deliver the tangible results a gas tax to fund transportation projects would.

There are other hurdles a low-carbon fuel standard would have to overcome, such as a technological breakthrough that’s been years in the making but has yet to materialize – the commercial scale development of an advanced form of biofuel known as cellulosic.

That form of biofuel has the lowest average carbon intensity of any biofuel yet developed, and uses plant material – not food, like corn-, canola-oil or sugar-cane based ethanol – in production. An OFM report done last fall calls for three cellulosic biofuels plants to be founded in Washington state in the next seven to eight years, at a cost of about $1.5 billion.

With Oregon, California and Washington on board, that large of a potential market would allow biofuels to compete with conventional gas and diesel producers, they argue. That’s why Sen. Kevin Ranker, D-Orcas Island, has called for a “clean” transportation package – cutting out the low-carbon fuel standard stipulation – in floor debates over the last week.

“I also believe investing in transportation at the expense of our environment is a false choice,” Ranker said in a statement following the vote on Monday. “This proposal unfortunately includes a poison pill that would reroute millions of dollars in transit investments into pavement if the Governor takes action on climate change.”

Republican caucuses pointed to a risk posed by fuels standards this week, in noting a recent spike in the price of gasoline in California due a refinery explosion that cut off supply. The state wasn’t able to rely on other sources as back up due to its fuel standards. Dave Fisher, a spokesman for the Western States Petroleum Association, said that’s a drawback of the program.

“Whenever you create a situation where you’re an outlier, then you do have some additional risk,” Fisher said.


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