Secure Our Fuels

Beware of the back-door EPA effort to impose cap-and-trade on gasoline

By Matt Dempsey, Secure Our Fuels

Is the Environmental Protection Agency working behind closed doors to impose a global warming mandate on transportation fuels that will make drivers pay more for gasoline and weaken America’s energy security? Consumers need to be vigilant in the months ahead to make sure that it doesn’t.

For now, as EPA Administrator-nominee Gina McCarthy said recently in response to questions from Sen. David Vitter, R-La., and other members of the Senate Environment and Public Works Committee, “EPA is not considering, nor does it have any plans to seek to establish a federal Low Carbon Fuel Standard.” So far, so good.

But there is reason to be cautious: EPA could still implement LCFS rules through another avenue known as “Sue-and-Settle.”

…Sue-and-Settle is an issue garnering a lot of attention, and for good reason. The U.S. Chamber of Commerce recently released a report, “Sue and Settle: Regulating Behind Closed Doors” that found EPA has, in conjunction with environmental groups, negotiated at least 60 such deals between 2009 and 2012.

Could an LCFS be next? It certainly won’t go anywhere in Congress. As with the cap-and-trade bill that suffered an ignominious defeat in 2010, members of Congress are leery of global warming mandates because of the costs (for no meaningful benefit) that would be imposed on constituents.

Numerous studies have shown just how bad an LCFS would be for jobs and the economy. A study by Charles River Associates found that a it would destroy between 2.3 and 4.5 million American jobs, and increase the cost of gasoline and diesel fuel by up to 170 percent over 10 years.

Imposing such a regressive policy won’t go over well with consumers. So it’s no stretch to think that IPI is mulling a closed-door, Sue-and-Settle outcome with EPA. If IPI eventually decides to take this route, and EPA keeps its word and rejects an LCFS, then IPI will have to head to court, which is a more uncertain endeavor.

For the sake of American consumers, we’ll be holding EPA accountable every step of the way.

Read the full Secure Our Fuels Op-Ed in the Washington Examiner HERE and learn more about the damaging impacts of a low carbon fuel standard from Secure Our Fuels.  

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NYU Petition: http://policyintegrity.org/documents/7.29.09IPIPetitiontoEPA.pdf

Is the Environmental Protection Agency (EPA) quietly working on a cap-and-trade scheme to ration gasoline?  Will this scheme be introduced under the innocuous-sounding guise of a “low carbon fuel standard” or the newer version “clean energy fuel standard”?  Lawmakers on Capitol Hill, who recently raised this warning, will soon have the opportunity to ask these very questions of President Obama’s choice to head the agency, Gina McCarthy, during her confirmation hearing next week.

The concern stems from the recent announcement by the Institute for Policy Integrity (IPI) at the New York University School of Law of its “intent to sue” EPA if the agency refuses to implement a cap-and-trade scheme for transportation fuels.  Among other problems, IPI’s action looks like the beginning of another “sue and settle” rulemaking, an abuse of the regulatory process.

Sue and settle typically plays out this way: An opposition group threatens a lawsuit over EPA’s alleged failure to meet a statutory obligation through rulemaking.  The issue in question is usually controversial, and, as in the IPI case, is unpopular with (because it will ultimately be paid for by) consumers.  A sympathetic EPA then convenes closed-door negotiations with the group, culminating in the announcement of a legal “settlement,” in which the agency agrees to commence the very rulemaking it otherwise refused to embrace.  When outrage ensues, EPA disingenuously claims its hands were tied, that they were in fact legally bound to impose higher costs on consumers—that, in effect, the “devil made them do it.”

Will EPA do the same with the IPI petition?  Only time will tell.  To date, the Obama-EPA has been relatively quiet about it.  As Politico reported in November, “EPA didn’t have a detailed response to the group’s action Wednesday. ‘We will review the lawsuit and respond accordingly,’ said agency spokeswoman Alisha Johnson.” But given that Gina McCarthy will be appearing before the Senate Committee on Environment and Public Works next week for her confirmation hearing, it’s a good bet that she will be asked about it.

The NYU Petition: Consumers Will Pay More at the Pump

At the heart of IPI’s petition is the contention that EPA is legally obligated to regulate carbon-intensive transportation fuels to address the threat of global warming. The best way to do that, IPI argues, is to drive up the cost of conventional fuels, such as gasoline and diesel. Doing so, they claim, will reduce carbon emissions. Of course, as former EPA Administrator Lisa Jackson admitted to Congress in 2009, unilateral action by the U.S. won’t have any meaningful impact on lowering global greenhouse gas concentrations. Nevertheless, IPI argues that EPA—and one suspects that EPA would agree—is compelled to impose costly mandates on consumers, forcing them to use more expensive “alternative fuels” they don’t want.  IPI acknowledges that the only way consumers are going to abandon affordable gasoline is for the government to impose regulations designed to dramatically increase the price at the pump. IPI admits this in their petition, though the admission is initially couched in a jargon-heavy manner to disguise the consequences from a skeptical public:

“As with any cap?and?trade system, covered entities would pass along the cost of the allowances to consumers, who will take into account the increased prices when deciding how much and which fuels to purchase.”

If one digs a little deeper in the petition, the acknowledgment is made in plain English:

            “As soon as an emissions cap is put in place, the cost of fuels will rise…”

Furthermore, IPI also acknowledges that higher energy prices are regressive, that is, they disproportionately impact the poor:

“When an emissions cap is put in place, many consumers are likely to see increases in their fuel prices as a consequence.  But this will not affect everyone equally:  lower? and middle?income households spend a larger percentage of their income on energy. Because they spend more of their income on energy, the effects of an emissions cap are felt most keenly at the bottom side of the income scale—the same groups that can least afford the cost.”

IPI argues that a cap-and-trade program—another way to describe a tax—is preferable to other schemes.  Executive director Michael Livermore told the Washington Examiner recently, “Market-based mechanisms, like the cap-and-trade approach advocated in our petition, are a highly cost effective and flexible means of reducing pollution.” Of course, by describing the tax as “market-based,” IPI hopes to make the scheme sound more acceptable to drivers.  But as with the unpopular cap-and-trade legislation proposed by Representatives Waxman and Markey in 2009, consumers won’t be fooled.  Despite the rhetoric, they understand the basic truth of these and other similar schemes: they will be taxed, and therefore pay more, for nothing in return.

Congress Has Rejected Cap-and-Trade

In reading through IPI’s petition, one senses the group is stuck in a time warp. When IPI filed the petition in 2009, they believed that Congress was on the verge of passing cap-and-trade legislation.  IPI couldn’t have been more wrong. In fact, cap and trade suffered a mortal blow in the United States Senate. The bill died thanks to overwhelming bipartisan opposition.  It was so unpopular even advocates, such as then-Senator John Kerry, were forced to say things like, “I don’t know what ‘cap and trade’ means.” Majority leader Harry Reid said, “We don’t use the word ‘cap and trade, that’s something that’s been deleted from my dictionary.’” Subsequently, no cap-and-trade bill has since been introduced in Congress. In fact, the US Senate voted overwhelmingly to oppose an international cap-and-trade scheme on airline travelers.

Sympathetic Obama Administration

Given its past support for cap-and-trade legislation, it’s no stretch to think the Obama-EPA would pursue cap-and-trade for gasoline and other fuels under the cover of sue and settle – particularly given questions surrounding EPA’s authority to implement an LCFS (which is, after all, just another name for cap-and-trade for fuels) under the Clean Air Act. All we can say for now is: Stay tuned.

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Following an Oregon State Senate panel hearing regarding the state’s controversial low carbon fuel program, the Oregonian weighed in with yet another editorial strongly opposing the program. In fact, the editors suggest – and we agree — it’s time to kill the program for the sake of Oregon consumers. The editorial notes, “The program’s inevitable effect on fuel prices has drawn opposition from groups as varied as the Oregon Farm Bureau and International Brotherhood of Electrical Workers Local 125, whose representative told DEQ in early 2011 that a ‘low carbon fuel standard will create higher costs for most goods and services, including food.’”

The Democrat Herald too, ran an editorial this week calling on the State legislature to let the program end, stating, “We still think the right call here for the Legislature is to let the program end. The initiative, which is meant to help combat climate change, means well – but it’s not clear whether it would have any significant impact on greenhouse gas emissions, and chances seem good that it could trigger an increase in the prices that businesses and consumers pay at the pump. And the program also seems virtually guaranteed to increase the paperwork nightmares for businesses trying to comply.”

The debate in the Oregon State Senate committee provides a good opportunity to begin reviewing the current state of play in the low carbon fuel standard (LCFS) debate not only in Oregon, but across the country. Thus far, Oregon is one of only two states in the nation to move forward with an LCFS program. Oregon passed legislation in 2009 commencing the process behind an LCFS mandate while California has actually begun implementing one.

As mentioned above, the Oregon Senate Committee on Environment and Natural Resources last week heard testimony on whether the State legislature should remove a sunset provision from the original 2009 LCFS law. (AP story on hearing here, testimony available here) The provision was designed to ensure legislative oversight over the LCFS and provide a way to halt the program in 2015 if the development of the LCFS were deemed infeasible. While advocates of the LFCS in Oregon are now working to repeal the sunset provision, Kevin P. Owens of Oregonians for Sound Fuel Policy explains in an op-ed in The Chronicle:

“Now, four years after HB 2186’s passage, and despite confusing, incomplete rules and repeated setbacks, DEQ is asking legislators to support SB 488, which would unnecessarily remove the sunset on this program without being able to demonstrate that the program can even work, let alone overcome its many complexities. Oregonians deserve public policy based on science and data, not solely on good intentions and wishful thinking. The proposed Low Carbon Fuel Standard (Clean Fuels Program) is unfortunately the latter.”

A previous Oregonian editorial, “Oregon’s clean-fuel folly” may have put it best, stating emphatically, “Lawmakers should have the guts to say ‘no’ and sit on their hands.” The editorial explains:

“The complexity of this undertaking is daunting, and the eventual effect on fuel prices will be significant. The law does require the program to include a safety-valve provision to protect consumers from price spikes, but the mechanism as currently structured is complex and doomed to fail…

“In other words, fuel prices are certain to jump substantially if the carbon-reduction portion of the fuels program goes into effect, and the likelihood that the state will step in to help consumers is almost zero. But that’s inevitable. A mandate that increases the use of ‘clean’ fuels — as this would — without also ramping up costs is a public policy unicorn. It’s nice to imagine, but it’s pure fantasy.

“Lawmakers should have the guts to say ‘no’ and sit on their hands. Oregon can’t hope to dent global greenhouse gas production by fiddling with its fuel supply, but the effort will harm Oregon consumers and businesses. That’s a bad trade-off.”

These concerns over the workability of an LCFS program also come with an expensive price tag. A recent Boston Consulting Group study found California’s LCFS mandate could cost the already struggling state economy $4.4 billion in tax revenue per year by 2020 and induce other negative impacts. The study found a LCFS could increase the cost of living for state residents as a result of higher fuel costs. In fact, BCG found that a “likely scenario is for cost recovery to exceed 250 cpg” (cents per gallon, or an increase of $2.50 per gallon) “coupled with gasoline supply shortages as early as 2015.”  Meanwhile, refinery closures across the state could cost up to 51,000 jobs in the region – a heavy cost for families trying to make ends meet. A study released by CEA in March 2012, with modeling conducted by SAIC, a leading provider of scientific services and solutions, also indicated that a LCFS in the Northeast/Mid-Atlantic region would result in the loss of 147,000 jobs, a $27 billion decline in GDP, a decrease in disposable personal income of $28.8 billion for Northeast families, and a doubling of gasoline prices. Is your family ready to pay $7/gallon? Is this flawed standard really worth the price?

Finally, policy makers in Oregon are keeping a close eye on the status of California’s LCFS mandate: specifically, the program faces questions in the Ninth Circuit Federal Court of Appeals over its constitutionality. Although a decision is expected later this year, this question is likely to be ultimately decided by the US Supreme Court.  We will certainly be diving further into the significant problems with California’s LCFS in future posts.

Tags: Clean Fuels Program, gas prices, LCFS, Low Carbon Fuel Standard, Oregon, Oregon Farm Bureau, Oregonians for Sound Fuel Policy, Secure Our Fuels, The Oregonian, The Register Guard
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The Natural Resources Defense Council (NRDC) recently took on Assemblyman Michael Gatto and a recent LA Times opinion editorial regarding California’s flawed low carbon fuel standard (LCFS).  Unfortunately, their response is misleading and incomplete.

California’s LCFS program, which took effect in 2011, requires a 10 percent reduction in “carbon intensity” in the state’s fuel supply. As Assemblyman Gatto recently explained, the standard discriminates against higher carbon-intensity crudes, such as Canadian crude, and corn ethanol in favor of lower carbon alternatives.   Since there is not a sufficient supply of low-carbon fuels available to meet consumer demand in California, the LCFS will increase the state’s reliance on lower carbon Middle Eastern fuel sources and Brazilian ethanol.  Increasing our dependency on foreign sources of fuel creates unintended negative environmental, economic and energy security consequences.

• NRDC ignores the Constitutional debate surrounding CARB’s LCFS scheme

Debates – and legal proceedings – are ongoing as to the constitutionality and scientific merit of California Air Resources Board’s (CARB) scheme. A federal District Court Judge has ruled that California’s program violates the U.S. Constitution’s Commerce Clause and struck the regulations down.  The judge concluded that the state acted unconstitutionally and the regulation “impermissibly treads into the province and powers of our federal government, reaches beyond its boundaries to regulate activity wholly outside of its borders.” CARB appealed the ruling, and a final decision is pending in the 9th U.S. Circuit Court of Appeals.

• NRDC ignores realities of CARB’s own policy on American ethanol producers

CARB’s indirect land use change (ILUC) scoring system attempts to quantify the environmental consequences of increased agricultural activity from the cultivation of fuel crops – primarily from deforestation.  CARB’s system penalizes ethanol from corn, which is sourced from the U.S. Midwest, while incentivizing imports of Brazilian sugar cane, which score lower on CARB’s carbon intensity scheme.  The foundation of the legal argument against CARB’s carbon intensity scheme is that it violates the interstate commerce clause of the constitution by discriminating against ethanol sourced from other states.  Essentially, CARB penalizes American farmers at the expense of Brazilian exporters. While NRDC claims this is due to Congress eliminating ethanol subsidies, the reality is that CARB’s own policy discriminates on American fuels, leaving consumers no choice but to choose from foreign sources.

• NRDC claims California’s fuels are not getting cleaner, overlooking the lifecycle greenhouse gas emissions (GHGs) associated with the LCFS

CARB’s carbon intensity scoring system penalizes crude oil from North America.  This phenomenon causes displacement of global energy supply chains and results in higher carbon emissions as ocean-going tankers “shuffle” North American crude to different markets with lower barriers to entry.  For example, some grades of Canadian crude oil might go to China via tanker rather than going to Californian markets, resulting in higher emissions as tankers burn bunker fuel to cross the vast Pacific Ocean.  In order to replace heavier North American crude, refiners would need to procure other lighter stocks, potentially requiring them to source their supplies from unstable or unfriendly foreign regimes.  Tankers departing North America to Asia and vice versa might literally pass each other in the night, distorting the transportation market, increasing costs for consumers, and increasing global carbon emissions.  According to a study by Barr Engineering, this shift in crude transport as a result of a LCFS could nearly triple the GHG emissions associated with crude transport.

• NRDC ignores the lack of ethanol supply in the American market

Perhaps the largest blind spot in CARB’s scheme is the continuing failure of the cellulosic ethanol industry to achieve commercial scale production.  NRDC ignores the fact that only a few thousand gallons of domestic cellulosic ethanol have ever been produced in the U.S. – not nearly enough to meet the massive demand of California’s 38 million residents.. As Bloomberg reported in November, 2012, “the Environmental Protection Agency has had to slash the targets for cellulosic ethanol because it isn’t yet commercially available.” Fuel providers will have no choice but to procure substitutes, many of which will come from foreign sources.  As the government continues to scale back and lower expectations for cellulosic production, consumers will pay the price.  Since substitutes to mandated cellulosic ethanol volumes are not readily available, scarcity and increased government transfers from refiners will raise costs for consumers in a market that is already home to the most expensive gasoline and diesel in the nation.

• NRDC claims a LCFS will create jobs when facts show otherwise

NRDC also claims that a LCFS will create jobs and economic opportunity for California. Yet a recent Boston Consulting Group study found a LCFS could cost the state $4.4 billion in tax revenue per year by 2020 and induce other negative impacts including loss of manufacturing expertise, increased cost of living resulting from higher fuels cost and refinery closures across the state.  The same study also found the refinery closures that will result from the full implementation of a LCFS could result in the loss of up to 51,000 jobs.  Not much of an economic opportunity.

NRDC notes that fuel diversity is good for consumers – and they are right. Fuel diversity is important for consumers. Electric and other alternatively fueled vehicle sales are growing in the state, and national CAFE standards are mandating vehicle manufacturers to increase fuel efficiency. But a LCFS does more harm than good. The current supply of ethanol called for by the standard is not available in the quantity consumers need. And while the electric vehicle market has made significant strides in the state, most electric vehicles are too expensive for the average consumer. Diversifying fuel supply is one thing – but crippling American consumers at the pump is certainly another.

As Assemblyman Mike Gatto highlighted in his editorial, “as long as Californians are still using gas to fill their tanks and to heat their homes, they should have some of the jobs in that industry.”  In its current form, the California LCFS will place an undue burden on Golden State drivers while providing no tangible environmental benefits—just burdensome tradeoffs. Michael Gatto knows this is the wrong choice for his district and the state. Too bad NRDC doesn’t agree.

Tags: 9th circuit, California, gas prices, GHGs, Jobs, LCFS, Low Carbon Fuel Standard, Michael Gatto, Secure Our Fuels
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This week, IHS CERA released a report on the development and potential markets for Canadian oil sands. One key takeaway? A low carbon fuel standard (LCFS) will impede the United States’ ability to access and utilize abundant supplies of crude oil from our neighboring ally, Canada.

A LCFS in its definition restricts the use of heavier crude oil – including Canadian oil sands. Not only does the standard force the United States to rely on lighter-crude supplies from the Middle East, “crude shuffling” of energy supplies forces drivers to be more dependent on oil from foreign energy regimes while providing no tangible reduction in greenhouse gas (GHG) emissions. In fact, the crude and ethanol shuffling that would occur due to California’s LCFS may even increase global GHG emissions as California refineries must import lower carbon fuel sources from markets farther and farther away.

Meanwhile, a secure source of energy from Canada is rejected under the standard, deterring investment in west coast refineries and the thousands of jobs and revenues this industry provides.  As E&E News (sub req’d) summarizes:

“In the United States, Canadian producers are looking to California’s refineries, many of which are configured to handle heavy oil sands crude, according to the report, as a largely untouched market. But the state’s Low Carbon Fuel Standard could derail sale contracts there if it penalizes the fuel for its higher greenhouse gas intensity.”

As the Oil and Gas Journal highlights, the west coast refinery market has the ability to refine and process this secure energy resource. Yet California’s acceptance of a LCFS will discourage this possible investment:

“On the West Coast, where 90% of refining capacity is oriented toward the heavy end of the crude slate, the potential market for bitumen blends might exceed 700,000 b/d, IHS says. But that market remains “largely untapped” by oil sands producers. Discouraging penetration of the West Coast market are uncertainty about pipeline construction and terminal expansion and California’s low-carbon fuel standard, IHS says. On the East Coasts of the US and Canada, most refining capacity is oriented toward lighter feedstock so those areas offer limited market potential for heavy blends.”

Unfortunately, limiting the input of oil sands-derived fuels into the west coast market could have impacts beyond Canada’s energy market. According to a Boston Consulting Group study, refinery closures as a result of the full implementation of a LCFS could result in the loss of up to 51,000 jobs and up to $4.4 billion of tax revenue per year by 2020. These refinery closures will result in reduced fuel outputs in the region, increasing gas prices and placing an even greater burden on American consumers.

Despite the federal Renewable Fuel Standard, that mandates the use of millions of gallons of cellulosic ethanol annually, manufacturers have produced only a few thousand gallons for the commercial marketplace. This does not bode well for the amount of biofuel that California would need to meet demand under an LCFS. Californians consume an average of 43 million gallons of gasoline and 8 million gallons of diesel fuel every day. Limiting the use and refinement of secure energy supplies from Canada will hurt the American economy and penalize West Coast refineries, leaving Golden State consumers to pay the price.

Tags: California, Costs, gas prices, Jobs, LCFS, Low Carbon Fuel Standard, Refineries, Secure Our Fuels
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In a December blog post, the Natural Resources Defense Council (NRDC) took on the feasibility of California’s low carbon fuel standard (LCFS). The post discusses the supposed benefits the standard would create as well as the role of electricity in the program, a topic the California Electric Transportation Coalition recently analyzed. Unfortunately (yet not surprisingly), NRDC failed to discuss the real damage that a LCFS can create.

For one, NRDC ignores the fact that electricity is generated from an array of sources including coal, oil, and natural gas, as well as renewables. Merely switching to electricity doesn’t change the fact that we rely on natural resources to create energy.  As a recent Boston Consulting Group study highlights, electricity generation is one of the top five sources of GHG emissions.  And as a 2010 Charles River Associates notes, quantifying and understanding the lifecycle emissions related to electricity generation is a complex and subject to the law of unintended consequences.

“Issues arise concerning the source of electricity to power electric vehicles and the emissions factor associated with the vehicle and its source.  Also, the emissions generated by transporting the electricity from the generating plant to the plug must be included.” [Link]  

Furthermore, a significant majority of consumers cannot afford to purchase new electric vehicles. While California has made strides in this sector, electric vehicles are not yet an economically feasible transportation option for average Americans.  And as California has seen before, volatile electricity prices also pose a threat to consumers. In 2000, extreme volatility led to spikes in California’s electricity prices up to $585/MWh.  A LCFS, with its additional demand placed on an already strained electrical grid could induce more prices spikes for Golden State consumers.

Secondly, NRDC fails to acknowledge a fundamental failure of the LCFS to reduce the transportation sector’s carbon emissions.  While a LCFS limits the use of heavier crude oil from our neighbors to the north, it increases the transportation time and travel distance of lighter crude oil from foreign sources. While that may help California meet its own carbon reduction targets, it actually increases the life-cycle greenhouse gas emissions (GHG) of our fuel supply. In addition, turning our backs on secure, reliable energy supplies from our ally Canada will only serve to increase our dependence on energy imports from unstable and unfriendly parts of the world.

Over the summer of 2012, U.S. consumers weathered some of the highest gas prices on record.  In California, average gas prices in 2012 were $4.028 per gallon, which shattered the previous year’s record by a whopping 21.3 cents.  The California Air Resources Board’s LCFS program could make those costs the norm according to the Boston Consulting Group.  The study found increased costs related to the LCFS could destroy 51,000 jobs in the refining sector alone by 2020.

As NRDC notes, “saving money at the pump is good for consumers, good for economic growth, and good for California” — and none of that is possible with a LCFS.

Tags: California, GHGs, Jobs, LCFS, Low Carbon Fuel Standard, Natural Resources Defense Council, NRDC, Prices, Secure Our Fuels
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Last week, the Natural Resources Defense Council (NRDC) released a study on what they view as solutions to states’ gasoline price vulnerabilities.  Overall, the study calculates the percentage of personal income spent on gasoline by the average driver in each state. The report than ranks states based on “their adoption of smart solutions to reduce their oil dependence—measures they are taking to strategically lessen their vulnerability and to bolster America’s security.”

The report touts low carbon fuel standards (LCFS) as a step in the right direction for states. Unfortunately (but not overly surprisingly), NRDC failed to consider the realities such a costly program will have on American consumers.  An LCFS program is not only infeasible – it would be a step into the abyss for consumers and for the state’s oil dependency.

According to NRDC:

“Drivers in every state in 2011 spent a higher percentage of their income on gasoline than they did in 2010, and drivers in the most vulnerable states spent more than twice as large a percentage of their income on gasoline as drivers in the  least vulnerable states.”

True. The past two years have seen record gasoline prices, and consumers cannot bear—nor should they have to bear—these increasingly volatile and escalating prices.  Yet the assumption that an LCFS will somehow decrease this vulnerability is fundamentally flawed.

The idea that biofuels (especially those derived from plant cellulose) are ready to meet transportation fuel demand has been disproven by several studies including a NERA critique of the recent UC Davis study as well as a Boston Consulting Group study on low-carbon policies impact in California. And, as Bloomberg highlighted last week, “The Environmental Protection Agency has had to slash the targets for cellulosic ethanol because it isn’t yet commercially available.”  The only thing an LCFS will do is restrict access to traditional fuels like gasoline and diesel, and increase prices at the pump, thus increasing the vulnerability of consumers and forcing them to pay even more for a limited fuel supply at the pump.

NRDC also views standards like an LCFS as good for our national security:

“Second, it ranks states based on their adoption of smart solutions to reduce their oil dependence—measures they are taking to strategically lessen their vulnerability and to bolster America’s security.”

The reality? Because an LCFS restricts the use of heavier crude oil from places such as Canada and Mexico, the US will be forced to rely on lighter-crude supplies from the Middle East.  This “crude shuffling” that an LCFS would create, as outlined in a report from Barr Engineering, will force drivers to be more dependent on oil from foreign energy regimes, ensuring our continued reliance on these foreign fuel sources.

Possibly the worst aspect of an LCFS is its complete inability to achieve its goal of carbon reduction, given the enormous costs that will be inflicted on consumers and the economy through the program.  While NRDC defines an LCFS as a program “which would reduce the greenhouse gas intensity of motor vehicle fuel”, the fact is that you cannot reduce the carbon intensity of any fuel type. The only thing that you can do is force traditional North American fuels out of the market though fuel switching and crude oil shuffling. This shuffling would actually result in increased greenhouse gas emissions, negating any potential benefits an LCFS is suggested to create. Yet according to NRDC, all states should be moving in the direction of an LCFS:

“While some states are pioneering solutions and many are taking some action, many states are still taking few, if any, of the steps listed in this report to reduce their oil dependence.

The NRDC’s assumption that an LCFS is the right choice for states could not be further off the mark.  Study after study has found that low carbon fuel standards will have a negative impact on state and local economies – and that they will increase (rather than decrease) our dependence on Middle Eastern oil. Sorry NRDC, but allowing these costly programs to move forward—on a state, regional, or federal level—will only increase the vulnerability of American consumers, not resolve it.

Tags: LCFS, Low Carbon Fuel Standard, NRDC
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Study after study has shown that a national low-carbon fuel standard (LCFS) is the wrong choice for our nation. The ineffective standard will threaten supplies, kill jobs and make the fuels we rely on every day much more expensive for American consumers. From record high gas prices to shuttered ethanol plants, the reality that an LCFS is both infeasible and economically damaging has entered further into the spotlight.

An LCFS program will require fuel providers to ration traditional fuels such as gasoline and diesel and replace them with “low carbon” fuels like cellulosic ethanol. Yet, as Bloomberg highlighted last week, “The Environmental Protection Agency has had to slash the targets for cellulosic ethanol because it isn’t yet commercially available.”

From Bloomberg:

“BP Plc., Europe’s second-biggest oil producer, is abandoning a cellulosic ethanol project in the U.S., its second move in a year to scale back in renewable energy.

“The company canceled plans to build a $300 million cellulosic ethanol plant in Highlands County, Florida, to focus on ‘more attractive’ projects…

“’Ethanol is not something a lot of people are interested in investing money in,’ Mark Schultz, an analyst at Northstar Commodity Investment Co. in Minneapolis, said in an interview today.

“’Corn-based ethanol hasn’t been profitable for about a year,’ he said. BP is ‘seeing that this isn’t the right street to go down anymore.’”

This news reconfirms that a national LCFS, such as that proposed by the UC Davis-led National LCFS Project, is not a viable policy. An economic analysis conducted by National Economic Research Associates, Inc. (NERA), found that the UC Davis group used false assumptions, selective analysis and unsupported conclusions to support the standard.

As the NERA analysis points out:

“The federal renewable fuel standard (RFS) has failed to stimulate the development of advanced biofuels. Congress established the RFS seven years ago yet only a few thousand barrels of cellulosic ethanol are available commercially. There’s no evidence an LCFS will better stimulate development of advanced biofuels than the RFS.”

“The study misconstrues the true drivers of fuel costs and therefore incorrectly assumes an LCFS will put downward pressure on global oil prices. UC Davis’ exaggerated view on how U.S. gasoline imports affect domestic prices erroneously predicts that gasoline prices will decrease.”

And as CEA highlighted in E&E News, an LCFS would be an economic disaster for the nation. More from E&E News(sub req’d):

“An LCFS policy that restricts imports of high-carbon unconventional oils, like Canadian oil sands crude, could lead to carbon leakage by simply shuffling those exports to other countries. This would provide no net global reduction in carbon dioxide emissions and could potentially threaten U.S. access to a stable supply of oil.

“’A national low carbon fuel standard would be an economic disaster for the United States. Study after study has shown that low carbon fuel standards will dramatically increase the price of gasoline and home heating oil, kill thousands of American jobs and stall our economy, all while actually increasing global greenhouse gas emissions,’ said Michael Whatley, executive vice president of the CEA, in a statement.”

On top of all this, as editorial boards and commentators across the country have noticed, these faulty policies will only exacerbate already record gasoline prices.

From The Oregonian:

“…Oregonians should hold onto their wallets and prepare for an eco-friendly train wreck. This program is nuts.”

“Fortunately, the solution to the innumerable problems posed by the low-carbon fuel standard is simple. First, the EQC should decline to adopt the new rules in December. Second, the Legislature should kill the standard in 2013. From PERS costs to high unemployment, Oregonians have more than enough complicated problems to worry about these days without shouldering voluntary burdens like this one.”

As CEA noted in the Washington Examiner:

“Atop of already record-high gas prices, several independent studies have found an LCFS will paralyze California’s refining industry by mandating the use of low-carbon fuels and vehicle alternatives, causing gasoline and diesel prices in the region to skyrocket.”

And again in the Wall Street Journal:

“Despite these fatal flaws, a UC Davis-led group is now behind a drive for a national LCFS mandate. As bad as an LCFS program will be for California, we can’t afford to see what it will do to the rest of the United States.”

Simply put, the model for a low-carbon fuel standard is infeasible and economically troubling. As our nation faces record high gas prices and stagnate job growth,  a national LCFS is simply not in the best interests of American consumers.

Tags: Jobs, LCFS, Low Carbon Fuel Standard, Secure Our Fuels, Wall Street Journal, Washington Examiner
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Michael Whatley, Vice President of Consumer Energy Alliance, wrote a guest blog post on the burden of a Low Carbon Fuel Standard on Consumers for the Washington-state based Ruminations Blog.  A few highlights:

“In 2011, American drivers paid an all-time record high average price of $2.53 per gallon   for gasoline. In 2012, gas prices are already 17 percent higher than last year.  For                Washington residents, gasoline prices currently exceed $4.00 a gallon and will cost Washington families 6% of their incomes this year.

“On the heels of already high gas prices, Washington consumers may soon be burdened with a fuel standard that will increase prices even further.  From the nation’s capital to California, a fundamentally ineffective and economically devastating program is beginning to make its way to the Evergreen state. Known as a low carbon fuel standard or LCFS, the program will mandate the replacement of traditional fuels such as gasoline and diesel with alternative “low carbon” fuels such as ethanol and electricity.

“While the program is intended to reduce the overall carbon footprint of fuel use, the faulty standard creates immense economic obstacles for consumers and businesses while creating no tangible environmental benefits.

“In California—where current gas prices are $4.64 and where a similar LCFS program is in effect –a Boston Consulting Group study found the standard will lead to $3.1-3.4 billion per year in net lost tax revenues, along with a loss of 28,000-51,000 jobs by 2020.   The program was also ruled unconstitutional for violating the Commerce Clause.  Oregon is also contemplating a similar standard referred to as the “clean fuels standard” which will paralyze the state’s oil imports. Should Washington really follow in these footsteps?

“The reality is that the Low Carbon Fuel Standard is the wrong choice for Washington consumers. Washington consumers won’t use less energy because there is an LCFS; they will just have to pay more for it.”

Read the full post online at the Ruminations Blog  HERE.

Tags: LCFS, Low Carbon Fuel Standard, Secure Our Fuels, Washington
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Despite gas prices recently topping $3.86 a gallon, some still want to send numbers at the pump even higher with a regulatory scheme called a “low-carbon fuel standard” (LCFS).  This new mandate would cause consumers more pain at the pump and cost our nation dearly in lost jobs and GDP, at a time when American families and the economy are still struggling through the weakest economic recovery since the Great Depression.

Faculty from the University of California Davis, joined by the Department of Energy-funded Oak Ridge National Laboratory and several other academic institutions, have proposed a national LCFS intended to ration the use of traditional, proven fuels like gasoline and diesel, and replace them with renewable and alternative fuels such as cellulosic ethanol, natural gas and electricity.

While those supporting an LCFS see this as a chance to promote new fuel technologies, the reality is that such a drastic mandate will paralyze the fuel industry and place an immense economic burden on our nation.  The alternative fuels and vehicles that such a program would rely on, while perhaps attractive on paper, simply do not exist – and cannot be conjured into existence by an ill-conceived policy – in the real world to anywhere near the extent that would make an LCFS program achievable.

Electric vehicles are too expensive and too limited in range to make sense for most American drivers; the average electric vehicle costs thousands of dollars more than its gasoline-fueled counterpart, and can travel only a fraction of the distance per “fill-up” before needing to recharge for up to several hours.  Cellulosic ethanol remains so technologically out of reach that ethanol manufacturers have yet to produce a single gallon for the commercial marketplace – despite the fact that development of cellulosic has been pushed for several years by the federal Renewable Fuel Standard, which already requires the use of millions of gallons of this nonexistent fuel each year. And natural gas vehicles (and the infrastructure to support them) are not projected to be available in the U.S. market in large enough numbers to make a meaningful dent in LCFS requirements anytime soon.

Even if an LCFS could be implemented, the costs of the program would deal a crippling blow to American consumers and the economy. A 2010 report by the independent research group Charles River Associates found that under a national LCFS, between 2.3 and 4.5 million American jobs would be lost, and gasoline and diesel fuel prices would increase by as much as 170 percent over 10 years.

An LCFS would not block the development of Canada’s oil sands, which is the not-so-hidden agenda of many LCFS supporters. Canada will still produce its oil resources – but instead of those resources serving as a secure supply of petroleum imports to the United States, they will be shipped overseas to Asian markets. In the meantime, the United States will be forced to make up the supply shortfall by increasing its oil imports from unstable parts of the world. In fact, according to a study by Barr Engineering, a nationwide LCFS would actually increase global greenhouse gas emissions by 19 million metric tons a year through this senseless “shuffling” of resources.

So while low-carbon fuel standards are being touted as a painless path toward environmental progress, in reality, an LCFS is infeasible to meet, will drive gasoline, diesel and home heating oil prices even higher than they are today, and threatens to kill millions of American jobs and stall U.S. economic growth – all while potentially increasing greenhouse gas emissions by millions of tons a year. The last thing the American people need is for their elected officials to impose this harmful and ineffective policy on our nation.

Michael Whatley is Executive Vice President of the Consumer Energy Alliance

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