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. 

One thing is for certain, based on the changes to the language (LCFS to CFS) it does appear that LCFS has become a four letter word. 

First let’s clear the air on the ad-hominem attacks. Consumer Energy Alliance is a non-partisan, non-profit group with more than 300,000 individual members nationwide and over 170 member organizations.  We support the thoughtful utilization of our all types of energy resources.  We advocate policies that create jobs, not destroy them, and aim to keep energy costs reasonable for consumers.  We look at science, and publically available data as we determine which policies we will support and those that we will oppose. 

So when we receive a report from a reputable source like IHS-CERA, we take it seriously.  Especially when the report is based on public data from the Environmental Protection Agency (EPA), the National Highway and Traffic Safety Administration (NHTSA), the Department of Energy (DOE) and the California Air Resources Board (CARB).

For example: EPA’s own fact-finding efforts show that NESCAUM’s assumptions are extremely optimistic.

According to a recent report by the National Science Academies Research Council, the biofuels industry will not be able to meet the cellulosic ethanol requirements in the RFS program, and that changes to the program are necessary. The RFS cellulosic biofuel standard for 2011 was originally 250 million gallons nationally and the 2012 national requirement for cellulosic biofuels is 500 million gallons. However, as of July 2011, no cellulosic ethanol has been commercially produced yet and EPA has only identified 3.6 to 15.7 million gallons of potential cellulosic biofuel capacity nationally for 2012.

Cleary, we are nowhere close to meeting national biofuels mandates under the RFS2.  Adding additional volume requirements under an LCFS would present a whole new demand shock to the system – which flies in the face of NESCAUM’s assertion that we can expect cellulosic ethanol and biodiesel to be available in massive quantities and cost less than gasoline and diesel. We agree with IHS-CERA that basing an LCFS economic analysis on this kind of unrealistic scenarios is both unscientific and useless.

NRDC also asserts that CEA’s opposition to a Low-Carbon Fuel Standard is based entirely on industry greed at the expense of the consumer, security, economy and environment. We respectfully disagree. In fact, our opposition is based on the fact that an LCFS would actually penalize North American energy supplies such as Canadian oil sands or Mexican heavy crude, make us more reliant on unstable and hostile governments, increase prices for consumers and eliminate American jobs

To date, biofuels represent only 1.8% of our National Energy portfolio. Although we strongly support the development of advanced biofuels such as cellulosic ethanol and renewable diesel and increased use of alternative fuels such as electricity and natural gas, hoping that renewables and alternatives replace tradition fuels like gasoline and diesel in the short-term does not make it a reality.  The infrastructure, technical know-how and alternative fuel supplies simply do not exist today and are not projected by EPA, DOE, CARB or anyone else other than NESCAUM to be available in sufficient quantities to meet the carbon reduction goals of an LCFS within 10 years. 

NRDC also claims that an LCFS will reduce carbon intensity by eliminating the use of high carbon fuels such as Canadian oil sands. However, an LCFS does not provide the intended environmental response and actually increases our global carbon footprint as a result of “crude shuffling.” According to study by Barr Engineering, a nationwide LCFS would increase global GHG emissions by 19 million metric tons annually.

 “Crude shuffling,” replaces Canadian crude with other foreign sources, increasing the amount of GHGs involved in transportation of the crude oil overseas and negating the desired reduction factor of an LCFS. Furthermore, increased fuel prices will strain businesses and put more American jobs at risk.

A June 2010 report by Charles River Associates found that between 2.3 and 4.5 million American jobs would be lost under an LCFS.  The price of gasoline and diesel fuel would increase by up to 170% over 10 years and our GDP would decrease between 2 and 3%. On top of all this, we will be forced to send greater sums of money overseas for crude oil, reducing our domestic energy security. We won’t use less energy because there is a LCFS; we’ll just obtain it elsewhere.

While NRDC would like to say our industry is “once again saying ‘no’ to change,” their recent blog overlooks the fact that America’s energy producers are some of the most innovative and creative members of our society. When it comes to changes in our fuels policies that will hurt American consumers and cost American jobs while doing nothing to aid the environment, CEA is happy to say no.

Rationing gasoline and diesel in order make cellulosic ethanol and alternative-fueled cars more cost competitive will cause severe distortions in the market and lead to significantly higher fuel costs for consumers.  In fact, a recent study concluded that an LCFS could raise gas and diesel prices by 170% over ten years.  With gas prices on the rise once again, it’s not hard to imagine what kind of impacts that prices that high will mean to California drivers.

As CARB reviews changes to the LCFS, speak up and tell them to cancel the program entirely.

Take Action: Click here to send your comment by December 9^th and the Consumer Energy Alliance will make sure your voice is heard at CARB’s next meeting.

“Enter the Law of Unintended Consequences. If McKibben and Hansen succeed in killing the pipeline, petroleum-related CO2 emissions might actually increase!”

“The Barr Engineering study analyzes the impacts on CO2 emissions of a low-carbon fuel standard (LCFS) that effectively bars U.S. imports of Canadian {oil} sands oil. Because global petroleum demand is growing, Canada would continue to produce {oil} sands oil even if the USA adopts an LCFS. However, instead of shipping the oil to the USA, Canada would ship the oil to China. At the same time, to meet U.S. demand that the LCFS does not allow Canada to fill, Middle East countries would ship oil to the USA that would otherwise go to China. The Canadian oil re-routed to China and Mideastern oil re-routed to the USA would travel by tankers, which burn fuel and emit CO2. Longer transport routes mean higher CO2 emissions.”

“Although killing Keystone would not ban imports of Canadian {oil} sands, as would an LCFS, it would effectively block much of the forecast 830,000 daily barrels of {oil} sands from reaching U.S. refineries. That, in turn, would induce similar re-routing of international oil flows. Each barrel “shuffled” to more distant markets would have a bigger carbon footprint than a barrel of Canadian crude shipped via Keystone to the USA.”

We were extremely disappointed with the Administration’s decision to delay the permitting of Keystone XL until after the 2012 election. This decision shelves 120,000 badly needed U.S. jobs for another year and means that we will have to get more of the oil that we use every day from places like Venezuela and the Middle East – which will (as Mr. Lewis points out) actually increase our carbon footprint.

“The assessment from consulting firm IHS Cambridge Energy Research Associates (CERA) calls an August analysis from the nonprofit Northeast States for Coordinated Air Use Management (NESCAUM) “flawed” and based on “unrealistic” assumptions. {The} report obtained by Greenwire says that the eventual NESCAUM conclusions about economic and environmental gain are without merit because of the original assumptions.”

“Michael Whatley, the Consumer Energy Alliance vice president, said the IHS CERA report shows that stakeholders should not take the sunny NESCAUM analysis at face value. “When it comes to economic modeling there’s an old saying: garbage in, garbage out,” Whatley said. “We hope that the policymakers in the Northeast and mid-Atlantic regions will take the time to fully evaluate NESCAUM’s assumptions before accepting the conclusions in NESCAUM’s economic analysis and jumping on the LCFS bandwagon.”

“For example, the IHS CERA study says that NESCAUM overstated the availability of cellulosic and next generation biofuels in the year 2022, citing an EPA study that cast doubt on the availability of biofuels. The study also says the NESCAUM overstated the potential price of alternative fuels and fueling infrastructure, as well as the viability of mainstream electric and natural gas vehicles.”

Read the entire article from Greenwire (subscription required) here.

NESCAUM Analysis “Flawed”, “Unrealistic”, “Meaningless”

IHS-CERA Report Concurs with EPA, EIA, and NAS

NESCAUM’s economic analysis of a Low Carbon Fuel Standard is littered with “flawed” and “unrealistic” assumptions, which render its conclusions “meaningless” according to a new report from IHS-CERA.  IHS-CERA’s conclusions dovetail with recent reports by the National Academy of Sciences, the Energy Information Administration (EIA), and the Environmental Protection Agency (EPA) which have all asserted that that the advanced biofuels industry is not close to meeting production targets after two years under Federal Renewable Fuels Standard mandates. They also directly contradict projections from EIA, EPA and the National Highway and Transportation Safety Administration regarding both the costs and future sales of electric and natural gas vehicles.

NESCAUM’s analysis (Northeast States for Coordinated Air Use Management) will be used to design a regional Low Carbon Fuel Standard proposal for the Mid-Atlantic and Northeast States.   NESCAUM’s overly-optimistic assumptions on advanced biofuels:

• Exceed EIA’s forecast of cellulosic ethanol availability in the Northeast region exceed EIA’s forecast of cellulosic ethanol use for the entire country
• Contradict the recent report of the National Academy of Sciences, which asserts that the capacity for producing cellulosic biofuels to meet the RFS2 to 2022 will not be available
• Conflict with EPA’s latest “on the ground” assessments, which reveal that there is hardly any cellulosic biofuel productive capacity available despite two years of aggressive RFS2 Federal mandate

Michael Whatley of the Consumer Energy Alliance, who commissioned the IHS CERA report, commented, “NESCAUM’s economic analysis lacks credibility.  When it comes to economic modeling there’s an old saying: garbage in, garbage out.  We hope that the policy makers in the Northeast and Mid-Atlantic regions will take the time to fully evaluate NESCAUM’s assumptions before accepting the conclusions in NESCUAUM’s economic analysis and jumping on the LCFS bandwagon. ”

IHS-CERA’s Key Findings:

• Assumptions about the availability of next generation biofuels, particularly cellulosic ethanol, are unrealistic.  NESCAUM’s assumptions about cellulosic ethanol availability in the Northeast region exceed EIA’s forecast of cellulosic ethanol use for the entire country.  It also contradicts the recent report of the National Academy of Sciences, which asserts that the capacity for producing cellulosic biofuels to meet the RFS2 to 2022 will not be available.  Moreover NESCAUM’s optimistic assumptions about supply are in conflict with EPA’s latest “on the ground” assessments, which reveal that there is hardly any cellulosic biofuel productive capacity available despite two years of aggressive RFS2 Federal mandate.

• Price assumptions for low carbon fuels are unrealistic.  The National Academy of Sciences report states that without subsidies, biofuels are only economic at a crude oil price of $191/barrel or, alternatively, at a carbon price of ~ $120/tonne CO2 equivalent .  NESCAUM assumes that cellulosic ethanol and biodiesel will be cheaper than gasoline and diesel, respectively.  This is unlikely since no cellulosic ethanol is produced commercially today and conventional biodiesel has been consistently more expensive than petroluem diesel for many years.

• Ignoring cellulosic biofuel availability for a moment, NESCAUM assumes that only cellulosic ethanol is blended into the ~25 billion gallon NE/MA  gasoline market but ignores that this will back out as much as 2.5 billion gallons of corn-based ethanol, which will have significant negative impacts on the corn-based ethanol industry and will make the Renewable Fuels Standard more difficult to comply with for fuel suppliers because the rest of the country will be faced with an E10 blendwall limit.

• Price assumptions for alternative vehicles are unrealistic.  NESCAUM assumes that electric vehicles are only marginally more expensive than similar vehicles with internal combustion engines and that plug-in hybrid electric vehicles achieve price parity with internal combustion engine vehicles. Both of these assumptions are strongly at odds with industry, government, and scientific consensus.
• Assumptions about the availability and market penetration of alternative vehicles are unrealistic.  Given the greater up-front cost and lack of refueling infrastructure for electric and natural gas vehicles, the rapid sales growth of these vehicles that NESCAUM assumes is extremely unlikely.

• Though NESCAUM used a suitable economic impact analysis methodology, flawed input assumptions render the results of their analysis meaningless.
• The NESCAUM economic impact analysis appears to be more focused on the transitory benefits of the “Infrastructure Phase” rather than the long-term contributions of the “Steady State Phase.”

• Overstatement of biofuels supply availability leads to a corresponding overstatement of job creation and economic contribution under the NESCAUM scenarios.

You can read the full analysis here.

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Consumer Energy Alliance (CEA) is a nonprofit, nonpartisan organization, comprised of more than 160 affiliate members, including energy consumers and producers, and tens of thousands of consumer advocates, that supports the thoughtful utilization of energy resources to help ensure improved domestic and global energy security, stable prices for consumers and balanced energy policy for America.

“A Low Carbon Fuel Standards (LCFS) Program will cost New Jersey’s consumers”

“NESCAUM’s (Northeast States Coordinated Air Use Management) economic analysis of LCFS, now referred to as Clean Fuel Standard (CFS), attempts to show that this program will actually create a net benefit for the economy. Yet the report is weighed down in assumption, making lofty claims that ignore the real costs of implementing these standards on American consumers.”

“These are real costs and real burdens that will be placed on the American consumer under an LCFS program. Until LCFS is supported by real numbers and real facts New Jersey should say no to increased costs, no to lost jobs, and no LCFS.”

You can read the entire article here.

“A preliminary reading of NESCAUM’s analysis shows some breathtaking assumptions.”

“NESCAUM assumes that soy diesel will be widely available and cheaper than diesel. NESCAUM assumes that all advanced low carbon fuels will be available in the quantities necessary and at prices lower than gasoline and diesel. NESCAUM assumes that natural gas and electric vehicles will cost the same as traditional gasoline/diesel vehicles.”

“It seems a real stretch to make assumptions like those and then put out an analysis that concludes that an LCFS program will have a small cost and net benefit for the economy.  Although we need to meet with NESCAUM and go over the methodologies used in this analysis in order to completely understand their conclusions, it appears that the flaws in this analysis are big enough to drive an electric truck through.”

Note: The full NESCAUM economic analysis can be accessed here.

 “An LCFS program will mandate the replacement of traditional fuels such as gasoline and diesel with alternative “low carbon” fuels such as ethanol.”

 “Forcing providers to ration their traditional fuels to supply these scarce fuel alternatives will drastically increase the cost of gasoline, diesel, and home heating oil for the consumer. Despite efforts, an LCFS does not accomplish its goal of reducing greenhouse gas emissions (GHGs).  In fact, the implementation of LCFS will generate increased emissions as a result of “crude shifting,” a product of forcing increased transportation of crudes to and from far away markets.”

“As a leader and pioneer in America’s energy sector, Pennsylvania should act now to secure its prominent position in American energy production…A regional LCFS will increase the cost of fuel and hurt jobs at a time when Americans can least afford it.”

“Consumers should read {NESCAUM’s} economic analysis with caution because it is based on flawed assumptions such as the lower cost of biodiesel or the availability of electric and natural gas vehicles.

“NESCAUM’s analysis assumes in all cases that alternative fuel technologies and advanced renewable fuels will be commercially viable and cheaper than traditional vehicles and fuels for a program that begins in two years. I don’t know how they can make that claim.  The real world facts are that biodiesel is significantly more expensive than diesel due to high soy crop prices and biodiesel shortages, that we do not have a single commercially viable cellulosic ethanol plant operating today anywhere in the country, and that both natural gas and electric vehicles are substantially more expensive than their traditionally-fueled counterparts.”

“These standards would negatively impact Pennsylvania consumers and businesses.”