On October 4th, California Governor Jerry Brown signed AB 1032 into law, correcting a tax problem and clearing the way for a significant increase in the volumes of biodiesel blended in the state. The bill, introduced by Assembly Member Rudy Salas and sponsored by the California Biodiesel Alliance, amended Section 60501 of the Revenue and Taxation Code by adding biodiesel to the law allowing for refunds on non-taxable fuel.
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Air Resources Board Votes
to Readopt LCFS and Adopt ADF
Takes Major Steps Toward Much-Needed Regulatory Stability
On September 25th, the California Air Resources Board (ARB) voted to readopt the Low Carbon Fuel Standard (LCFS) and to adopt the state's first-ever regulation on the commercialization of alternative diesel fuels (ADF), under which biodiesel will be the first fuel to be regulated. Biodiesel will come into the ADF regulation as a Stage 3A fuel, having completed the requirements of Stages 1 and 2. Both regulations take effect January 1st, 2016 and constitute important benchmarks in the process of moving toward the regulatory certainty needed by California's biodiesel industry and the low carbon fuels sector.
Many years of concerted and coordinated efforts by CBA and the National Biodiesel Board have been invested to ensure biodiesel's accurate inclusion under LCFS and that the best possible ADF regulation was put in place.
Low Carbon Fuel Standard (LCFS)
Because the court in the POET, LLC v. California Air Resources Board case found inadequacies in ARB's compliance with the California Environmental Quality Act (CEQA) and the Administrative Procedures Act (APA), the LCFS had to be readopted. ARB staff took the opportunity to include clarifications and enhancements based on what they had learned in administering the regulation since its implementation in 2011. Importantly, ARB is sticking with the original LCFS goal of a 10% reduction in the carbon intensity of fuels by 2020. The regulation includes a new compliance curve to reach that goal, beginning with an immediate jump to 2% from the 1% level it has been held at for several years during the re-adoption process, then ramping up steeply from there.
The core elements of the program remain the same, but enhancements include cost containment through a price cap and Clearance Market; allowing fixed rail and electric and hydrogen forklifts to generate credits; and several refinery-related measures, including allowing them to generate credits for GHG emissions reduction projects.
Other key changes include a two-tiered system under which all new and existing CI scores must be calculated using the CA GREET 2.0 spreadsheet. GREET 2.0 has been updated using the latest science. This will result in pathways and CI scores specific to each fuel, a new requirement.
Conventionally produced first-generation fuels, such as biodiesel and starch- and sugar-based ethanol, fall under Tier 1. Tier 2 fuels are next-generation fuels, such as cellulosic alcohols. Tier 1 fuels produced using an innovative method, such as the use of low-CI process energy sources, may move into Tier 2. ARB will be conducting a GREET 2.0 workshop in October (TBD).
Updates to ILUC values include reductions for soy biodiesel to 29.1 g/MJ and canola biodiesel to 14.5 g/MJ and a new value for palm oil biodiesel of 71.4 g/MJ. Corn ethanol, sugar cane ethanol, and sorghum ethanol ILUC penalties are now reduced to 19.8 gCO2/MJ, 11.8 gCO2/MJ, and 19.4, respectively.
Alternative Diesel Fuels Regulation (ADF)
Reporting requirements for all producers, importers, blenders, and sellers of biodiesel in the state begin on January 1st, 2016 for the ADF regulation, but the actual implementation of the pollution control levels and fuel specifications requirements do not begin until two years later on January 1st, 2018.
The ADF regulation modeled ARB's findings of biodiesel's emissions characteristics and took into account related offsetting factors -- factors in the commercial market that effectively offset NOx emissions, such as new technology diesel engines (NTDEs), fuels, and feedstocks -- to establish pollution control levels. These are the levels above which NOx mitigation will be required. Low blends of biodiesel may be used without mitigation, depending on the time of year (high or low ozone season) and feedstock saturation (as determined by ASTM specifications for cetane level).
Specifically, blends above these pollution control levels must employ an ARB-approved NOx additive or ADF fuel formulation:
to Readopt LCFS and Adopt ADF
A program review by ARB staff will be completed by the end of 2019. It will determine the program's efficacy and will take into account offsetting factors and any other factors that may affect biodiesel's NOx emissions.
A sunset provision will kick in when heavy duty vehicles with NTDEs comprise 90% of all actual vehicle miles traveled by heavy duty vehicles in the state, which is expected to occur by the end of 2022, according to ARB staff.
###All those affected are especially encouraged to read the text of the regulations (listed below) and related documents..
LCFS Docs: http://www.arb.ca.gov/regact/2015/lcfs2015/lcfs2015.htm
The LCFS regulation proposed text, incorporating all 15-day changes (PDF - 877K).
ADF Docs: http://www.arb.ca.gov/regact/2015/adf2015/adf2015.htm
The ADF regulation proposed text, incorporating all 15-day changes (PDF - 316K)
Biodiesel Industry RFS Comments Leave No Stone Unturned
In written comments submitted to the Obama administration, CBA called for higher volumes under the pending modest RFS proposal establishing Biomass-based Diesel volumes for 2014-2017. The comments began with a bang: "In 2014, as a result of the poor market conditions created by the lack of a strong biodiesel mandate, four of California's eleven biodiesel plants closed their doors. Other plants scaled back production, laid off workers, deferred expansion projects, and lost investment opportunities."
The comments call for biodiesel standards of not less than 2 billion gallons for 2016 and 2.3 billion gallons for 2017 and cite arguments from the National Biodiesel Board (NBB), which has worked tirelessly on this issue of critical importance to the health of the biodiesel industry.
It is not uncommon for CBA's comments, especially on California matters where we work closely, to state that we support the technical comments of the NBB. However, in this case, CBA repeatedly referenced arguments put forth in the NBB's case for higher volumes, which total 150 pages and detail our industry's case on the broad range of issues upon which the EPA will make its final decision.
The NBB's comments, based on months of work by staff and the RVO Working Group, include an unprecedented level of technical and economic analysis and documentation on points ranging from the technical and performance qualities of the fuel to production capacity, imports, and feedstock supplies. They can be viewed or heard (via podcast) here.
The EPA has said it plans to finalize the rule by November 30th after taking into consideration the many thousands of public comments they have received.
CALIFORNIA ENERGY COMMISSION (CEC): AB 118 FUNDING
The Lead Commissioner Report version of the 2015-2016 Investment Plan Update for the Alternative and Renewable Fuel and Vehicle Technology Program was adopted at an Energy Commission Business Meeting on April 8th. The new plan allocates $20 million for all biofuels production with no infrastructure investment funding offered. For more information:
STATE WATER BOARD: UNDERGROUND STORAGE TANK ISSUES
The State Water Board has sent out a notice to underground storage tank owners and operators announcing that new revised federal UST regulations were issued on July 15th, 2015. According to the document, the Water Board is reviewing the federal regulations to see if new California statute and regulations are in order. The notice says that a switch in fuels to a blend above B20 would require the owner to notify the CUPA 30 days prior and that owners/operators must demonstrate compatibility for as long as the substance is stored.
Biodiesel is an advanced biofuel made from waste or virgin vegetable oils or animal fats. It is a sustainable, cleaner-burning, diesel fuel replacement that meets strict quality specifications. Biodiesel derived from waste can reduce greenhouse gas emissions up to 86%.