Oregon Poised to Extend Low-Carbon Fuel Law

Bill removes sunset of Clean Fuels Program, allows Phase 2 to roll out

Oregon fuels (CSP Daily News / Convenience Stores / Gas Stations)

Oregon Governor Kate Brown (D)

SALEM, Ore. -- Oregon is set to extend a state program that aims to cut carbon emissions from transportation fuels by 10% in 10 years.

The Clean Fuels Program, signed into law in 2009 and modeled after California's program, will require businesses that import gasoline and diesel into Oregon to cut the carbon intensity of their fuels to meet annual standards. They can do so by importing lower-carbon biofuels and alternative fuels, or buying credits from providers of "clean fuel," including most types of ethanol, biodiesel, natural gas, biogas, hydrogen, electricity and propane.

The program recently completed its first phase, during which fuel producers and importers had to register, keep records and report the carbon intensity of the fuel they produce or import for use in Oregon. The second phase--with rules that were approved this January and that went into effect in February--requires fuel importers to calculate surpluses and shortfalls against baseline carbon-intensity values and then strike a balance by blending with biofuel or purchasing offsets. There are more than 60 fuel importers currently registered with the program.

The Clean Fuels Program was set to sunset in December 2015, but the Oregon House of Representatives narrowly passed a bill this week that was approved by the state Senate last month (SB 324) extending the program through 2016, according to a story by Oregon Public Broadcasting. This is aimed to give time for the carbon-cutting requirements to gain traction and to create a clean-fuel credit market.

Governor Kate Brown (D), who recently succeeded Gov. John Kitzhaber (D) after he resigned under pressure from an ethics scandal, has said she supports it, but has not confirmed whether she would sign it.

"For me, clean fuels translates into cleaner air for Oregonians. I think that's a good thing," she said in a press conference in February, according to The Bend Bulletin.

In a statement, Andrea Durbin, executive director of Oregon Environmental Council, praised the passage of the bill.

"This program will clean up the air and give people more choices and access to cleaner fuel options," said Durbin. "Oregon is doing its part to cut carbon pollution and show the nation it is possible to both grow the economy and protect the environment."

Oregonians for Sound Fuel Policy, a group representing various state industry associations--from general contractors to loggers to restaurants--as well as the Western States Petroleum Association, released a statement urging Brown to veto the bill, arguing it would increase fuel costs for businesses and consumers.

"SB 324 acts like a hidden gas tax that will take money away from working Oregonians and Oregon families," said the group. "SB 324 will serve to transfer most of those hard-earned resources to energy credit traders, brokers and out-of-state corporations."

The state Department of Environmental Quality had estimated a 4-to-19-cent-per-gallon increase in the price of fuel by 2025 once the Clean Fuels Program is fully enacted. California's own cap-and-trade program, which began holding fuel distributors to an annual greenhouse-gas cap in January, has only modestly impacted retail prices, according to reports, although a refinery outage, among other issues, has inflated gasoline prices in the state.

Meanwhile, the narrow, cantankerous passage of the bill appears to have scuttled talks between Republicans and Democrats on a transportation bill that would have increased the state gasoline tax to help pay for infrastructure.