HB1091 – Implements a low-carbon fuel standard.
Prime Sponsor – Representative Fitzgibbon (D; 34th District; SW Seattle & Vashon Island) (Co-Sponsor Slatter – D) (Requested by the Governor)
Current status –
Conference committee version passed by both houses.
In the House – Passed
Replaced by a substitute and passed out of committee January 21st. Had a hearing in Appropriations on February 4th; replaced by a 2nd Substitute and passed out of Appropriations February 9th. Had a hearing in the House Committee on Transportation February 16th, was amended, and passed out of committee as a 3rd Substitute on the 19th. Referred to Rules. Amended on the floor and passed by the House February 27th. Returned to the House by the Senate for possible concurrence with amendments there; the House refused to concur in the changes April 20th, and asked the Senate to agree to its version. Conference committee report signed April 24. Passed by the House April 25th.
In the Senate – Passed
Referred to the Committee on Environment, Energy and Technology. Had a hearing March 10th; replaced by a striker, amended, and passed out of committee March 16th. Referred to Ways and Means; had a hearing March 27th; replaced by a much weakened striker, amended, and passed out of committee April 1st. Referred to Rules April 2nd; amended on the floor and passed by the Senate April 8th. The Senate declined to accept the House version, and the bill went to conference committee. Conference committee report signed April 24. Passed by the Senate April 25th.
Next step would be – To the Governor.
Legislative tracking page for the bill.
Comments –
(The original bill was an updated version of HB1036, but the only substantive change was requiring fuels to have associated emissions at least 20% below 2017 levels to generate credits.)
The current price of CO2e reductions under California’s low carbon fuel standard is $200/metric ton; in Oregon it’s roughly $100/tonne.
Summary –
Conference Committee Striker –
This slows the rate at which reductions in fuel carbon intensity need to be made by dropping the provision for a step up to 2.5% reductions in 2032 and 2034. This delays the point at which a 10% reduction is reached by several years, and creates a pause at that level; it now requires a JLARC report on the program and a legislative review at that point before continuing the program, rather than requiring the reauthorization in the Senate’s version. It moves the date for reaching a 20% reduction out to 2038. Like the Senate bill, it drops the House provision that said Ecology had to require any additional reductions after 2031 that were needed to meet the State’s targets. It makes the implementation of the bill dependent on an increase of at least five cents a gallon in the gas tax rather than the additional $500 million in transportation funding added in the Senate’s version.
It makes the continuation of the program past the 10% reduction level dependent on at least a 15% increase in biofuel production and in state feedstocks, and on the approval beyond appeals of at least one new or expanded facility increasing biofuel capacity by more than sixty million gallons a year. (It says this expansion must include at least one new facility producing at least ten million gallons a year.) It also expands the severability clause to specify that the rest of the act is still to be enforced if these provisions are held to be invalid.
The striker drops the provision specifying that broadband investments generate credits, but adds a provision to the House definition of a credit saying that they can be generated by “other activities consistent with this chapter.” It allows up to 10% of total credits to be generated by state investments reducing transportation GHG emissions and decarbonizing the sector. It drops the Senate’s provisions about limiting SEPA review for new biofuel facilities and requiring the evaluation of their net cumulative emissions.
The final version caps the price of credits in the clearance market in 2023 at $200 (in 2018 dollars); it’s limited to inflation increases after that. It follows the Senate version in requiring Ecology to hold a clearance market if any covered facility is short of credits, allows carrying forward deficits, requires Ecology to undertake an exploration of the root causes for a shortfall after two deficit periods, and allows it to implement remedies for the problem (subject to some prohibitions). It follows the Senate in requiring electric utilities to spend 50% of their revenue from credits they generate on transportation projects that Ecology and DOT decide produce the largest reductions in GHG emissions, rather than on the vehicle purchase incentives the House specified. It adds that they “should consider” projects expanding low and moderate income access to zero-emission transportation.
The conference version kept the Senate provision requiring deferral of compliance obligations for at least a quarter and up to four years if the forecast projected there were not going to be enough available credits to meet covered parties’ obligations, requiring an emergency deferral if there was not an adequate supply of renewable fuels for reasons that couldn’t have been foreseen or prevented, and providing a full or partial deferral for an individual party unable to comply for reasons beyond its control. It drops the House and Senate provisions about a WSU study of least conflict sites and a stakeholder process about mitigation of impacts, and has Ecology and Commerce make recommendations about improvements to permitting processes for industrial projects and facilities, and mitigations of their environmental impacts instead.
It makes the expedited Energy Facility Site Evaluation permitting process an option for smaller biofuel facilities capable of producing between 1,500 and 25,000 barrels a day.
Senate floor amendments –
These prohibit Ecology from raising the standard after 2026 unless a new biofuels production facility producing more than sixty million gallons of biofuels a year has been successfully permitted, and there’s been at least a 25% increase in the volume of in-state biofuel production and the use of agricultural feedstocks grown within the state. They require the program to generate credits for investments funded in an omnibus transportation act that reduce greenhouse gas emissions and decarbonize the sector, but allow Ecology to limit the number of those that can be earned each year. They require rule making for the program to conform to the standards for significant rules under the Administrative Procedure Act; if funds are appropriated, they require the WSU Energy Program to consult with stakeholders and identify least conflict priority sites for projects to produce significant volumes of low carbon transportation fuel, require Ecology to periodically consult with stakeholders to identify and discuss mitigation of significant likely environmental impacts associated with them, and require periodic reporting to the Legislature on a range of issues about them.
In Ways and Means –
The striker replaced the requirement for a 2028 standard 10% below 2017 levels with a set of stepped reductions producing a maximum reduction of 4% by then, followed by maximum reductions of 1%/yr through 2031, and 2.5% a year through 2034. It no longer requires Ecology to update the rules to produce emission reductions through 2050 consistent with the state’s targets. It requires the passage of “a separate additive transportation funding act” generating more than $500 million/biennium in revenue before Ecology can actually activate the program. [This is the same provision recently attached to the cap & trade bill.] It no longer has Ecology design mechanisms to provide a financial disincentive for relying on the mechanisms for cost compliance, and directs the department to hold a credit clearance market for any period where at least one regulated party is short of credits. It caps the maximum price for credits in the clearance market at $200, adjusted for inflation. [This is about their current price in the California market.] It requires Ecology to evaluate the net cumulative GHG emissions for new or expanded facilities that would require a SEPA review and would result in annual GHG over 25,000 MT per year, including any net displacement of global emissions. [This involves estimates like the controversial ones for the Kalama methanol proposal, where the proponents claimed that the methanol would be used in China to produce plastics with fewer emissions than what would be used to make them there otherwise.] It requires 50% of an electric utility’s revenues from credits to be used for activities and projects that Ecology and the Department of Transportation jointly decide do the most to reduce GHG emissions and decarbonize transportation. If the forecast projects there will be less than 100% of the credits needed to comply with the requirements during a compliance period the bill requires Ecology to issue a deferral, adjusting the requirement temporarily, using the requirement for the previous period, suspending the calculation of deficits, or taking other measures needed to keep the costs of credits under the cap. The bill no longer allows broadband projects to generate credits, and makes some other minor changes that are summarized by staff at the end of it. The amendment requires Ecology to use the standard for the previous period if it determines before the beginning of 2026 or 2028 that available in-state feedstocks for the program are less than 25% of what’s needed for compliance.
In the Senate Committee on Environment, Energy and Technology –
The striker in committee made a number of modest adjustments to the bill which are summarized by staff at the end of it; the amendment specified that utility credits for providing power from a zero emission resource for transportation are only available for electricity supplied to a metered customer for charging or refueling, and limits the required mechanisms for assigning credits to charging in a utility’s service area. (Ecology could apparently still decide to assign them for providing charging beyond that area.)
Amendments on the House Floor –
Amendments required Ecology’s reports on health benefits to distinguish between those from the Clean Fuel Standard and those from vehicle efficiency improvements; authorized credits for broadband investments facilitating remote work and required Ecology to create a metric for them; removed expedited site review for clean fuel projects; created a program to identify least conflict priority sites for them; required periodic consultation with stakeholders on mitigation for probable environmental impacts from them and reporting to the Legislature on mitigation, funding needs, permitting, and environmental review; and allowed nonprofit and public entities to earn credits from fueling battery or fuel cell vehicles. Representative Fitzgibbon’s amendment and Representative Paul’s amendment each made a number of changes which are summarized at the bottom of those. (All the amendments are available at the bottom of the bill page.)
Second substitute adopted by House Environment and Energy –
There’s a staff summary of the changes made by the second substitute at the beginning of that. An additional amendment in the House Transportation Committee would require Ecology to expedite processing of environmental reviews under the State Environmental Policy Act and permit applications for projects related to producing low-carbon transportation fuels.
Substitute adopted by House Environment and Energy –
There’s a staff summary of the changes at the beginning of the substitute. (They include requiring 50% of the revenue to go to reducing the cost of new electric vehicle leases and purchases, and giving utilities credits for electricity used in residential charging.)
Original Bill –
The Department of Ecology is to establish rules to reduce the intensity of transportation fuels, including electricity, used in the state. They’re to take effect January 1st, 2023, and to reduce the full life-cycle greenhouse gas emissions attributable to fuels other than electricity to 10% below 2017 levels by 2028 and 20% below 2017 levels by 2035. (By 2031, Ecology is to update them so emissions from transportation sources will meet the state’s target of a 95% reduction from 1990 levels by 2050.)
The rules are to create a system of trackable, verifiable, tradeable, and bankable credits, generating a credit (or a deficit) when the production, importing, or dispensing of fuel with a lower (or a higher) carbon intensity than the department’s standard results in the emission of a metric ton of CO2e. The estimates of greenhouse gas emissions may not privilege fuels from any particular places, and must reflect the carbon intensity of each electric utility’s mix of generation sources. The rules must include cost containment mechanisms, such as provisions allowing the department to establish a credit clearance market and sell credits at a price it sets after the end of each compliance period, a similar means for complying if participants haven’t been able to acquire enough credits to meet the requirements by the end of a period, and a similar means of ensuring that the prices of credits don’t significantly exceed those of credits in similar programs in other jurisdictions. (Such mechanisms must be designed to financially disincentivize participants from relying on them rather than reducing emissions.) Persons associated with the supply chains of transportation fuels covered by the program and those generating credits from fuels that are not covered by the program may elect to participate in the market. (The department may also designate an entity to aggregate and use credits generated by any persons covered by the program that generate credits but choose not to participate.)
Electricity and fuels used by aircraft, vessels, railroad locomotives, and military vehicles are not covered by the program. Fuel for off-road logging vehicles, construction and mining, and agriculture isn’t covered until 2028, but can be used to generate credits and trade them before then. Ecology is also authorized to allow the generation of credits associated with electric or alternative transportation infrastructure that already exists when the bill becomes effective.
The rules must allow generating credits from providing zero emission vehicle refueling infrastructure and other low carbon fuel infrastructure including, fast charging battery electric vehicle infrastructure and hydrogen electric vehicle refueling infrastructure. They may allow generating credits from any activities that reduce emissions in the state, including carbon capture and sequestration projects, such as innovative crude oil production projects including carbon capture and sequestration; refinery investments in it; or direct air capture projects; and fueling of vehicles with electricity the department certifies as net-zero. (This must include electricity for which a renewable energy credit or other environmental attribute has been retired or used only for purposes of the program; electricity produced using a zero emission resource that’s directly supplied as a transportation fuel by its generator, and the smart charging of an electric vehicle when the carbon intensity of grid electricity is comparatively low.) The department’s to periodically consult with an advisory panel, including representatives of forestland and agricultural landowners, on how to best incentivize and allot credits for sequestration through activities on agricultural and forestlands. It may set yearly limits on the credits that can be generated by emissions reducing activities that it chooses to include, providing those “take into consideration” the return on investment needed for it to be financially viable.
Before each compliance period, the Department of Commerce, in consultation with Agriculture and Ecology, is to estimate whether the expected supply of low-carbon fuels will generate enough credits to meet the program’s compliance requirements.
Utilities must spend half of their low carbon fuel standard revenues from supplying retail customers on projects supporting the use of electrification or renewable hydrogen in transportation. Sixty percent of that must go to projects in or directly benefiting areas with high levels of air pollution or disproportionately impacted communities identified by the department of health. Ecology may adopt requirements, developed in consultation with utilities, for spending the other half of these revenues.
Details –
Calculations of life-cycle emissions may include “changes in land use associated with transportation fuels and any permanent greenhouse gas sequestration activities”, and may consider the efficiency of a fuel as used in a powertrain.
The department may obtain additional information it needs to estimate fuel emissions from suppliers and utilities; companies covered by the program should be allowed to demonstrate appropriate carbon intensity values to the department if that doesn’t counter the reduction goals of the program or prove administratively burdensome.
It’s to try to harmonize the rules with those of other states that have adopted low carbon fuel standards or similar requirements for low-carbon transportation fuels and that supply (or might supply) significant quantities of those to the state, or get them from us.
There are variety of reporting requirements. The bill allows Ecology to collect fees from participants to to cover the costs of administering the program. It extends the current penalties for violations of air pollution standards to include violations of the bill’s requirements. The Joint Legislative Audit and Review Committee is to report to the Legislature on a variety of issues about the program after five years, including its costs and benefits, associated emissions reductions, and its effects on employment and fuel prices. The bill removes a poison pill provision about the transfer of transportation funds which has been intended to block adoption of the standard.