EPA already at work on 2026-forward RFS rules
The Environmental Protection Agency (EPA) has started work on the second set of rules for the Renewable Fuel Standard (RFS), expected to span multiple years beginning in 2026, a spokesperson said today.
The rule will likely establish renewable volume targets for multiple years under the RFS, although the exact timeframe has not been confirmed, EPA deputy office director Ben Hengst said today at the Argus North American Biofuels, LCFS and Carbon Summit in Monterey, California. Work on the incoming rule was originally not expected to begin until early 2025.
Updated analysis, especially regarding advanced biofuels and feedstocks, will inform new rulemaking, as well as the inclusion of regulatory changes intended to improve the program's implementation, Hengst said.
Unprecedented growth in US biofuels imports led overall advanced biofuel supply in 2023 to far surpass EPA projections. But biomass-based diesel volumes for the current rules were based on projected growth in North American feedstock supply — not international availability nor the nameplate capacities of US refineries, Hengst said.
There were also large increases in imported feedstocks for biofuel production, namely in used cooking oil and tallow.
But the potential for an upset in global trade flows remains an agency concern. Domestic policy in some countries could boost offshore consumption of feedstocks and finished fuels that have arrived to the US market in recent years, while the US policy environment itself remains vulnerable to change.
The EPA is also navigating recent adverse judgments against its interpretation of the Small Refinery Exemption program and is prioritizing the development of options that would comply with court orders.
There was no clarity provided on eRINs as the EPA continues to consider its options.
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California regulator floats future LCFS linkage
California regulator floats future LCFS linkage
Monterey, 17 September (Argus) — California would welcome bringing US low-carbon fuel standard (LCFS) programs together in a common market, one of the state's top regulators said on Tuesday. Such a linkage is unlikely to occur in the near future, but California Air Resources Board (CARB) deputy executive director Rajinder Sahota said it is something worth pursuing. "I totally think we should link our LCFS programs," she said at the Argus North American Biofuels, LCFS and Carbon Markets Summit in Monterey, California. Sahota said California and other LCFS states are working on a system that could allow the trading of compliance credits between companies covered by each program, but did not provide any other details. Her comments mark a change in tenor from CARB, which historically has said a linkage would be difficult given the differing starting points and carbon intensity targets of each program. Oregon's Clean Fuels Program (CFP) started five years after California's LCFS, while Washington launched its Clean Fuel Standard just last year. New Mexico is working on its own program that will begin by 2026. Oregon and Washington regulators at the conference said there have not been any formal discussions about a linkage, but did not completely dismiss the idea, highlighting the close informal coordination between the states. "All puzzles can be solved eventually," said Bill Peters, interim director of the CFP. By Michael Ball Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
California still eyeing 2025 start to LCFS changes
California still eyeing 2025 start to LCFS changes
Monterey, 17 September (Argus) — California regulators plan to propose changes to the state's Low Carbon Fuel Standard (LCFS) in coming days in hopes of ensuring updates to the program take effect in early 2025. The California Air Resources Board (CARB) will soon issue a new rulemaking package for a 15-day public comment period, Rajinder Sahota, the agency's deputy executive officer, said today at the Argus North American Biofuels, LCFS & Carbon Markets Summit in Monterey, California. "We will be working very hard to ensure we have the targets in place" by 1Q, she said. On a practical level, CARB will have to adopt any amendments to the LCFS by early January or will be forced to start over. California law requires the agency to wrap up a rulemaking within 12 months of the first proposal. Sahota declined to say what changes, if any, to the most recent language would be part of the next 15-day package. The previous language included a 9pc "step down" in the carbon intensity requirement in 2025 and also contemplated a 20pc/yr cap on a company's credit generation from soybean- and canola-oil-based biodiesel or renewable diesel to begin in 2028. That new language "is coming very shortly," she said. The agency's board is scheduled to hold a hearing on the proposed changes on 8 November and could adopt the new language at that session. The LCFS requires yearly reductions in the carbon intensity of on-road transportation fuels. Fuels with scores above the targets produce deficits, which must be offset with credits generated from distribution to the market of approved, lower-carbon alternatives. California currently requires a 20pc drop in carbon intensity by 2030. The ongoing rulemaking could bump that carbon intensity reduction up to 30pc. Surging use of renewable diesel and outsized credit generation from renewable natural gas have overwhelmed deficit generation to create a glut of credits available for future compliance. LCFS credits do not expire, and 26.1mn metric tonnes of credits — 16pc more than all the new deficits generated in 2023 — were available for future compliance by the end of March. Credits fell in May to trade at $40/t, the lowest level for current quarter credits since June 2015, but have since rebounded as the CARB process has played out. But credit prices are still well below their historical highs. Argus on Monday assessed spot LCFS credits at $58/t. By Michael Ball Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Competitive SAF prices, policy needed to scale market
Competitive SAF prices, policy needed to scale market
Monterey, 16 September (Argus) — Efforts to scale the US sustainable aviation fuel (SAF) market will hinge on the industry's ability to narrow the price premium to conventional jet fuel, an impossible task without expanded policy and a coordinated industry focus, stakeholders said today. "The final frontier of scale is cost," SGP Bioenergy chief executive officer Randy Delbert Letang said at the Argus North American Biofuels, LCFS and Carbon Summit. Airlines are ultimately concerned with the economic feasibility of low carbon fuels versus conventional, Letang said, adding that where finer details on the road to the lowest-cost and -carbon SAF are concerned, they don't necessarily want to "know or see how the sausage is made". Fellow panelists deemed advancement in feedstock technology, risk mitigation for investors and lenders and a coordinated industry effort as essential in scaling SAF in the US and abroad via the lowering of SAF prices. Incentive programs such as Low Carbon Fuel Standard (LCFS) programs across the west coast, and the potential for expansion into other states, are one way to narrow the gap. But those present opposed restrictions on incentives between renewable feedstocks, such as those recently proposed for diesel alternatives in California, and agreed the market remains in too early a stage for complicating incentives. To narrow the scope of the aviation industry's carbon-reduction discussion to specific feedstocks and their respective carbon intensity scores could "let perfect be the enemy of good," said Eric Holle, Phillips 66's renewable fuels commercial optimization manager. As SAF projects are alternately proposed and shuttered , panelists emphasized a need for the industry to mitigate but ultimately accept the risks inherent to an adolescent and quickly evolving market. Ensuring the industry's narrative is consistent will be key in the next few years to convincing investors and lenders to accept that risk, Letang said. Reducing the carbon footprint of conventional petroleum fuels via blending biofuels, as well as expanding the applicability of those fuels — to the maritime and aviation industries, as example — is the best focus of industry efforts in the near term, he added. By Jasmine Davis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US SAF stakeholders call for coordinated support
US SAF stakeholders call for coordinated support
Monterey, 16 September (Argus) — Government needs to provide stronger and more harmonized regulation to encourage sustainable aviation fuel (SAF) production in the US, according to a number of industry stakeholders. The high cost of SAF compared with conventional jet fuel requires federal and state regulatory policy to help minimize risks for SAF plant investors, said Bruce Fleming, chief financial officers of SAF producer Montana Renewables at the Argus North American Biofuels, LCFS and Carbon Summit today. But while there is broad support, a "tapestry of different regulations, with important details materially at odds" is creating an unstable regulatory environment, he said. Producers have a roughly 10-year recovery period on investments, according to Fleming, so investors require long-term certainty of their return through offtake agreements and support from lawmakers, but this has thus far been inconsistent . On a federal level, there's a "donut hole" in the proposed switch in incentives from the current blenders' tax credit to the new 45Z clean fuel production tax credit which is due to be implemented from 1 January 2025, said Fleming. But detailed guidelines for the new credit have not yet been released, and it is only guaranteed until 2028, rather than for the 10 or more years that would smooth investors' risk profile. Meanwhile the Environmental Protection Agency has signaled it will miss its statutory deadline to [finalize 2026 biofuel blending targets , creating further confusion, Fleming said. Mismatch internationally, locally US policies are also somewhat at odds with other regions, notably the EU which is mandating 2pc SAF in the jet fuel mix from next year, which could draw US volumes away from the domestic pool. On a local level, different US states are going at different speeds with regards to their low carbon fuel standard programs and the feedstocks they will accept, injecting further complexity in the calculations for SAF producers and airlines. Illinois, for example, is implementing a $1.50/USG credit but is capping the volume of soybean-derived SAF and making it only available to airlines operating in the state rather than producers — at odds with similar schemes in California, Washington and Oregon. Tax incentives also need tweaking to encourage flexibility in manufacturers to produce SAF rather than renewable diesel, said Sean Newsum, Airlines for America Managing Director of Environmental Affairs. Renewable diesel consumption has grown so quickly in markets such as California because the mix of RINs and LCFS credits essentially meant customers are paying no premium for the product over fossil fuel diesel, Newsum said. Now even stronger incentives are required to lower the final cost airlines are paying for SAF to close the price gap over jet fuel, and push producers towards renewable aviation rather than road fuels. The uncertain regulatory environment means the US is due to fall far short of its SAF Grand Challenge target to supply 3bn USG/yr in the domestic market by 2030, according to speakers at the conference and Argus analysis, rising up to 35bn USG/yr by 2050. There is 3.5bn USG/yr of SAF production capacity planned by 2030, according to Argus data, but only around 90mn USG/yr is currently operational and 535mn USG/yr of the planned projects are categorized as "firm" — meaning there is a relatively high degree of confidence they will move forward. The rest are either seen as only "provisional" or "very provisional" given the difficulty in answering the risk questions posed. By Amandeep Parmar Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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