Secure Our Fuels

State of Play: LCFS in Michigan

Few states stand to lose out more under the imposition of an LCFS scheme than Michigan – but that reality didn’t stop state Rep. Lee Gonzales (D-Flint) from introducing LCFS legislation in the Michigan House last September. If passed, the bill would mandate the state Departments of Agriculture, Energy, Natural Resources, and Environmental Quality to come up with an LCFS plan in consultation with activists from the “land conservation,” “wildlife conservation,” and “environmental” organizations – all part of a strategy that somehow equates to “more jobs for our workers,” Gonzales said in a press statement announcing the bill.

Although that legislation has yet to see significant action in the House, Michigan remains an active member of the Midwestern Governors Association (MGA), which is currently engaged in promoting the LCFS. Over the next three months, the MGA is expected to first release comments on the draft LCFS framework it is presently working to construct, releasing its final draft recommendations by June, and rendering its final recommendations to MGA member states by the end of 2010.

Production and Distribution: How/Where Does Michigan Get Its Energy?

Thanks to recent innovations in horizontal drilling and hydraulic fracturing technology, Michigan has recently become a significant producer of natural gas from the Antrim Shale – but it remains a state with relatively few petroleum resources on hand.

Because of that, Michigan has come to depend on its neighbors in Canada for the fuel it needs to run its commercial sector; today, more than 63 percent of the oil consumed in the state comes from Canada.  In fact, these imports come from nowhere else — a full 100 percent of Michigan’s “foreign” energy is supplied each day by Canada, taking the form of crude oil, as well as refined products such as propane, gasoline, diesel fuel, kerosene, and waxes and lubricants.

In large part a function of its close relationship with Canada, and consistent with its position at the “front of the line” in receiving Canadian imports, energy prices in Michigan tend to be lower than the national average in several key categories. The chart below, derived from data supplied by the Energy Information Administration (EIA), tells that story in greater detail:

 Source: Energy Information Administration, Dec. 2009 (latest available)

LCFS Impact on Michigan

As mentioned, more than 63 percent of Michigan oil’s comes from Canada – sources that an LCFS is engineered to disadvantage relative to other imports (and even many U.S. sources). But whereas it may be possible for other states, most notably on the West Coast and throughout the mid-Atlantic, to substitute out Canadian energy imports for energy supplies from other countries, that option is simply not available to Michigan. Again, because of the geography of the state, 100 percent of Michigan’s imports come from Canada.