Oregon Announces Phase II of Clean Fuels Initiative

Importers, blenders will need to blend biofuels, buy offsets to meet carbon-intensity standards

Oregon Clean Fuels Program

SALEM, Ore. -- The state of Oregon's semi-dormant Clean Fuels Program has just been fully jolted back into life and is ready for Phase II, which includes carbon-reduction requirements for fuel producers and importers.

This month, Governor John Kitzhaber directed the state Department of Environmental Quality (DEQ) to proceed with fully implementing the Clean Fuels Program, which has a goal to cut the carbon intensity of transportation fuels in the state 10% by 2025. The program was passed into law by the state legislature in 2009, but up to this point has only been partially implemented.

The first phase of the program requires fuel producers and importers to register, keep records and report the carbon intensity of the fuel they produce or import for use in Oregon. In the years since the program was adopted, the DEQ has been collecting this fuel data but not yet implemented the second phase, which includes meeting carbon-reduction requirements. With the governor's directive, the DEQ will be requiring fuel importers to calculate surpluses and shortfalls against baseline carbon-intensity values and then strike a balance by blending with biofuel or purchasing offsets.

According to the governor's office, because of the delay in fully implementing the program, Oregon has sent more than $6 billion out of state in 2012 alone by importing gas and diesel. It has also stymied growth in the state's developing alternative-fuel industry, the Kitzhaber administration argues. While Oregon has no oil refineries, it has several biofuel producers, feedstock growers, and other alternative-fuel providers working in electric, propane and natural gas.

"We have the opportunity to spark a homegrown clean fuels industry right here in Oregon--an industry with a big impact in communities urban and rural alike," said Kitzhaber in announcing the directive. "I'm committed to using every tool at my disposal to support 21st-century industries and innovation, and to attract investment and new jobs to our state."

According to The Oregonian, however, petroleum industry groups have countered that the Clean Fuels Program will increase gasoline prices and that its targets for biofuel blending cannot be satisfied by corn-based ethanol, which continues to be the biggest fuel alternative in the United States.

Besides directing the full implementation of the DEQ, Kitzhaber also announced the formation of the Clean Fuels Work Advisory Committee, a group of business and labor representatives who will discuss how to best leverage the potential of clean fuels in Oregon. They include representatives from vehicle manufacturers such as Daimler North America, technology providers such as Intel, state biofuel and natural-gas suppliers and business associations.

Petroleum industry groups, however, are criticizing the fact that this committee includes no fuel blenders.

"It'd be important to have fuel blenders and people affected by this on the advisory committee," Brian Doherty, public affairs counsel for the Western States Petroleum Association (WPA), told the newspaper. "It's their choice to do whatever they want to do, but I think it's a flawed program."

The Clean Fuels Program is actually set to expire in 2015, and efforts in the state legislature to lift the sunset date of the program have so far failed. According to the governor's energy policy advisor, state officials are planning to implement Phase II of the Clean Fuels Program by the beginning of the 2015 legislature, with the expectation that the state congress will eventually succeed in lifting the sunset date in 2015.