Upon issuance of the draft rule, Michael Whatley, Executive Vice President of the Consumer Energy Alliance, made the following statement:

“Today’s action by the Department of Environmental Quality is a troubling development. Low carbon fuel standard programs like this one, which seek to ration the use of gasoline and diesel, are economic growth killers.  These programs mandate the use of biofuels which have limited commercial availability and are more costly for consumers, small business and working families.

“Additionally, studies clearly demonstrate that LCFS programs will prove ineffective in actually reducing carbon emissions.  The last thing that drivers in Oregon need is a program that will double their gasoline prices and won’t help the environment.”

A study by Charles River Associates found that an LCFS could create a price shock of about a 30 to 80% increase in the cost of transportation fuels within 5 years of the time the program was implemented and up to a 170% in 10 years.  The shock would be caused by the large increase in production of low carbon fuels required to achieve the reductions in emissions required by the standard.

Like the program recently proposed in California, Oregon’s would also be creating a non-competitive situation due to the fact that the state receives the bulk of its fuel from Washington state and California.  Fuel providers will have to accept whether they will pay cost of compliance with Oregon or abandon the market altogether.  Even those spearheading similar programs have recognized the legal uncertainty surrounding LCFS.  Recently, executive director of the Northeast States for Coordinated Air Use Management (NESCAUM) Arthur Marin expressed concern in a recent interview about the constitutionality of California’s LCFS program, pushing NESCAUM to examine alternative models for a low carbon fuel standard.

A copy of the proposed program can be found here.

WASHINGTON – Earlier today, the New Hampshire Senate passed HB 1487, an act that will prohibit the State from funding participation in any national, state or regional low carbon fuel standard (LCFS) without legislative approval.
Upon the announcement, Michael Whatley, Executive Vice President of the Consumer Energy Alliance, made the following statement:

“Today’s vote by the New Hampshire Senate is a victory for energy consumers in the Granite State. With recent studies indicating that a regional LCFS would more than double gasoline prices in New Hampshire, reduce disposable income, hammer the State’s GPD and threaten thousands of jobs, passage of this legislation is a win for New Hampshire drivers and home heating oil users.

“On the heels of a winter with record home heating oil costs, and in the midst of record spring gasoline prices, consumers should not be asked to pay more to take care of their families, heat their homes, and drive to work.  We hope that the Legislature will be able to work out the differences between the House and Senate versions of the bill quickly and send it to Governor Lynch shortly.

A recent report by Consumer Energy Alliance, with modeling conducted by SAIC, found that a Northeast/Mid-Atlantic LCFS would have a costly impact on all eleven states within the region including a cumulative loss of 147,000 jobs, an overall 10-year economic impact of $306 billion, and a doubling of gasoline prices—all while failing to reach standard’s intended carbon reduction goal.

A copy of the bill can be found here.

A copy of the report from CEA can be found here.

In December, U.S. District Judge Lawrence O’Neill ruled that the program is unconstitutional because it violates the commerce clause.  In response to the 9^th Circuit’s ruling, CEA Executive Vice President Michael Whatley stated:

“We are disappointed that the 9^th Circuit Court of Appeals has chosen to allow, pending resolution of the appeal, a costly and  destructive program to continue while placing countless American jobs and consumers at risk. Even those supporting California’s LCFS have acknowledged its legal risk.  CARB’s claims that ‘the Low Carbon Fuel Standard drives investment and innovation, creates new jobs and provides the next generation of clean fuels to all Californians,’ have been debunked by study after study.  At the end of the day the LCFS will fail to reduce CO2 emissions, double gas prices, place thousands of jobs at risk, and will cost our economy billions of dollars.”

“As the Court moves forward with the appeals process, CEA will continue to pursue our challenge to this unconstitutional and costly state program that will have little to no impact on global carbon emissions.”

Even those spearheading the program’s development have recognized the legal uncertainty surrounding the LCFS. In the Northeast, NESCAUM executive director Arthur Marin expressed concern this week in an interview about the constitutionality of California’s LCFS program, pushing NESCAUM to examine alternative models for a low carbon fuel standard.

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“Consumer Energy Alliance and its members remain deeply concerned that the Northeast/Mid-Atlantic states will move forward with a regional low carbon fuel standard modeled on the framework adopted by California and declared unconstitutional by the federal district court for the eastern district of California. We also believe that if adopted and challenged in court, such a program would also be declared unconstitutional.”

Recent studies by CEA, IHS-CERA, Barr Engineering, and Charles River Associates have all found that the implementation of a regional LCFS will cost the northeast region thousands of jobs, reduce state revenue, and double regional gas prices over 10 years.  These studies have also indicated that the desired carbon reduction goals of an LCFS are not achievable under realistic market scenarios. 

Letters were sent to all 11 NESCAUM states.  See a sample letter to Pennsylvania Attorney General Linda Kelly HERE.

In addition to the program’s inherent inability to achieve the goal of a 10-percent CI reduction by 2022 or even 2035, the CEA study found that implementation of a NE/MA regional LCFS would have the following costly impacts on the region:

• An overall 10-year negative economic impact of $306 billion for a maximum achievable 5% CI reduction in 2022

• A cumulative loss of 147,000 jobs

• Gasoline prices would at least double

• An increase in fuel expenditures of $156 billion

• An increase in diesel prices of at least 18 percent in 2022 vs. 2012

• An increase in jet fuel prices of at least 23 percent in 2022 vs. 2012

• A decline in Gross Domestic Product of $27 billion

• A decrease in disposable personal income of $28.8 billion

• A required $20 billion in tax subsidies to induce adoption of alternative fuel vehicles

• Required expenditures of $800 million for vehicle refueling infrastructure.

Not only does the study conclude an LCFS program incapable of meeting its intended goal of a 10 percent reduction in carbon intensity of fuels over the coming decade, it will have a catastrophic impact on the Northeast and Mid-Atlantic economies.

As American consumers face rising gas prices and northeast refineries are forced to close, any legisla    tion that seeks to raise the price of gasoline, threaten our fuel supply, and cost jobs is unacceptable.

• Doubling gasoline prices in the Northeast and Mid-Atlantic,
• Loss of 147,000 jobs,
• $28.8 billion decrease in disposable personal income,
• Overall negative economic impact of $306 billion.

Furthermore, the study found that despite the imposition of these huge costs on consumers and the economy, the LCFS program would fail to meet its goal of a 10-percent reduction in the carbon intensity of fuels. This is the direct result of the practical supply and demand constraints represented by the modeling, and the need to satisfy the region’s energy demand.

Based on this study, CEA believes that the NESCAUM analysis of the proposed LCFS was lacking in depth, methodology and analysis, and failed to account for the region’s energy needs.  

Upon the release of the report, CEA’s Michael Whatley made the following statement:

“While families and businesses in the Northeast and Mid-Atlantic are facing record high fuel prices and refineries in the region are shutting down, NESCAUM is proposing an alternative fuels forcing regulation that would double the price of gasoline.  At a time of high prices and looming regional fuel shortages, a low carbon fuel standard is the wrong choice for consumers.  Implementing a regional LCFS would kill 147,000 jobs, reduce GDP by $27 billion, and double today’s already soaring gas prices—all while failing to meet NESCAUM’s own target for carbon intensity reduction in fuels.

      “At a time when many Americans can barely afford to drive themselves to work, how can an ineffective, costly and duplicative standard like an LCFS be the right choice for any state? NESCAUM’s regional LCFS program is simply an unfeasible option for American consumers.”

The CEA study found that NESCAUM relied on flawed assumptions about the market’s ability to secure an adequate supply of biofuels, the infrastructure needed to support that demand, and the projected replacement of existing vehicles. These findings further support an analysis conducted by IHS-CERA in October 2011 that found NESCAUM’s economic analysis to be deeply flawed and riddled with unrealistic assumptions regarding the availability and price of advanced biofuels, electric and natural gas powered vehicles during the timeframe of the potential LCFS mandate.

A copy of the CEA study can be found HERE.

A copy of the IHS CERA report can be found HERE.

A copy of EIA’s report “Potential Impacts of Reductions in Refinery Activity on Northeast Petroleum Product Markets” can be found HERE.

In response to the development, Consumer Energy Alliance (CEA) Executive Vice President Michael Whatley stated:

“The decision by CARB to appeal the decision by the District Court is disappointing, but unfortunately not surprising. We look forward to a decision by the Ninth Circuit upholding the District Court and confirming the unconstitutional nature of California’s low carbon fuel standard.”   

“In addition to discriminating against out of state fuels, the California LCFS would have driven gasoline and diesel prices for consumers through the roof while providing no real benefits for the environment.  Rather than appealing Judge O’Neill’s sound decision, CARB should scrap this faulty program.”

On January 5, CARB appealed the ruling and followed up Friday with a filing to lift the stay on the potential program.  On Monday, Judge O’Neill rejected that petition. Today, CARB filed its appeal with the 9th Circuit in San Francisco. Details surrounding the timing of the injunction are still being developed.

A copy of Monday’s amended decision can be found here.

A copy of the court’s original decision can be found here.

In response to the development, Consumer Energy Alliance (CEA) Executive Vice President Michael Whatley stated:

“We commend Judge O’Neill for standing firm on his initial decision against this harmful and unlawful policy.  Not only is an LCFS unconstitutional, but it would also hurt the California economy, farmers, consumers and truckers by raising fuel prices sharply and burdening consumers. 

“As proposed, the LCFS favors oil from unfriendly regimes and blocks the use of oil from friendly nations like Canada.  And ironically, the policy will have the opposite of its intended effect by creating more greenhouse gases in the long run.”

The federal district court finding on December 29th found an LCFS in California to be unconstitutional.  Specifically the court found that “LCFS discriminates against out-of-state and foreign crude oil while giving an economic advantage to in-state crude oil.” It also found that “the LCFS discriminates against out-of-state corn ethanol and impermissibly controls extraterritorial conduct.” Because the state had failed “to establish that no alternative means exist to address their legitimate concerns of combating global warming,” the LCFS is invalid. The court stayed enforcement of the LCFS pending further judicial review. 

On January 5, CARB appealed the ruling and followed up Friday with a filing to lift the stay on the potential program.  Last night, Judge O’Neill rejected that petition.

A copy of yesterday’s amended decision can be found here.

A copy of the court’s original decision can be found here.

On January 5, CARB appealed the ruling and followed up today with a filing to lift the stay on the potential program.

In response to the development, Consumer Energy Alliance (CEA) Executive Vice President Michael Whatley declared:

“CARB’s decision isn’t surprising to us.  They have attempted to subvert the intent of the Constitution at every turn and the courts agree.  No matter whether the stay is lifted or not we will continue to fight this blatant attack on the commerce clause and the ripple effects that CARB’s misguided Low Carbon Fuel Standard will have on farmers, families, truckers and energy consumers around the U.S.”

A copy of the court’s decision can be found here.

A study conducted by IHS CERA on NESCAUM’s latest senario analysis of an LCFS found that the economic analysis undertaken was “critically flawed” and overly-optimistic. Not only will the cost for fuel sky-rocket, there will not be enough qualifying low-carbon fuel to sustain the population’s needs. With the highest share of households in the nation using fuel oil for winter space heating, Maine cannot afford to implement an LCFS.  With no fossil fuel reserves of its own, Maine relies on Canada for 60% of its petroleum imports. Home heating oil is no different. Not only would an LCFS drastically reduce the amount of Canadian fuel oil available to the state, fuel costs will skyrocket as demand for limited fuel sources such as biofuels increases.   As IHS CERA confirms in their report, these fuels are not produced commercially today and have been consistently more expansive than petroleum diesel for years. 

A recent article in the New York Times, Federal Cuts Give Maine a Chill as Winter Approaches November 27, 2011, unveils the unfortunate reality that is already plaguing northeastern states—increasing home highlighted heating oil prices. An LCFS will only do more harm:

“ Michele Hodges works six days a week but still cannot afford a Maine winter’s worth of heat for her trailer in Corinth, a tiny town where snowmobiles can outnumber cars. Ms. Hodges and her two teenage daughters qualified for federal heating assistance last year, but their luck might have run out. President Obama has proposed sharply cutting the Low Income Home Energy Assistance Program, and Maine is at this point expecting less than half of the $55.6 million that it received last winter, even as more people are applying.”

“ At Penquis, a nonprofit agency in Bangor where people can apply for federal heating aid, more than 9,000 households have done so since August, said Melanie Hurlburt, a division manager there…’Clients are calling me back when they get the benefit and saying, ‘What am I going to do?’ Ms. Hurlburt said. ‘I hear a lot of reports about what temperature they plan to keep their homes at, and I’m amazed — you know, 50 degrees. You’re barely above keeping your pipes from freezing.’ In Bangor, the average low in January is seven degrees.”

For the time being, some of Maine’s wealthier residents such as novelist Stephen King, who grew up in a trailer home just miles away from where he now resides, are trying to do their part to help those in need. 

“Everybody is just hurting, and everybody is scared,” Mr. King said in an interview last week. “If we took everything we had and tossed it into the pot, it still wouldn’t make much of a difference.” Still, he said, “There was no question of not helping when we saw how much the cut was.”

But for now, most Mainers are forced to push through and make do.  We cannot place these people at any greater risk.

“Robert Ketch, 72,…said he lived on a monthly Social Security check of about $900. Mr. Ketch said that if turned down for assistance, he would survive the winter by doing what many a Mainer before him has. ‘Tough through it,’ he said.”

Maine’s reliance on Canadian energy imports both for the purposes of fueling vehicles and warming houses renders the state among the most vulnerable to the price and supply disruption that an LCFS would cause. 

For a state that is already struggling to make the through the winter months, implementing an LCFS would be detrimental to the health and survival of these northeast communities.