Oregon deal to swap LCFS for gas tax is dead

OREANDA-NEWS. June 29, 2015. A proposal to swap Oregon's low-carbon fuel standard (LCFS) for an increase in the state's gasoline tax is dead for the current legislative session, governor Kate Brown (D) said yesterday.

"Given the complexity of the issues and the remaining time available, there simply is not a path forward through both chambers for a proposal that accomplishes both this session," Brown said, adding that the idea of paying for the state's transportation infrastructure and reducing greenhouse gas emissions "should be decoupled and considered separately." This would avoid the " ‘my way, or no highway' situation in which we now find ourselves," she said.

The legislative package Brown negotiated with eight lawmakers has received withering criticism from environmental groups in recent days, and at a Senate hearing yesterday where its projected emissions reductions were called into question.

The legislative package would have traded the LCFS, enacted just three months ago, for a 4?/USG increase in the gas tax, along with other taxes and fees, to raise \\$343.5mn for transportation infrastructure improvement.

The LCFS, which takes effect next year, will require a 10pc reduction in the carbon intensity of the state's fuels by 2025.

While Democrats control both chambers of the state legislature, they are one vote shy of the three-fifths super-majority needed to pass new taxes in the House. Republicans have refused to lend their support to any gas tax increase if the LCFS remains, arguing it would lead to two increases in Oregon's fuel prices.

Brown made the announcement a day after a state official told a Senate hearing they had overestimated the reductions from transportation improvements in the package by 1.5mn metric tonnes of CO2. The Department of Transportation originally estimated emissions cuts of 2.02mn t, but agency director Matthew Garrett said the agency had made errors in its initial modeling. With the errors corrected, the agency's new estimate is 430,000t, putting the expected overall cuts from the agreement at 7.2-8.2mn t, compared with 7.7mn t for the LCFS. The new estimates called into question one of the key selling points of the agreement, which is that it would result in greater emissions cuts than the LCFS.

Lobbyists for the Western States Petroleum Association (WSPA) and Oregon Fuels Association (OFA) said the blending program, which mirrors an OFA ballot proposal to replace the LCFS, would provide environmental benefits to the state.

Brian Doherty, the lawyer for WPSA, said California's LCFS and larger fuel market will drive the commercialization of novel low-carbon fuels. Oregon's blending program will then create demand for those fuels once they have been commercialized and their production costs fall to an acceptable level, he said. The transportation bill would only allow the blending of low-carbon fuels with an average retail cost equal to or less than the cost of the gasoline or diesel.

But environmentalists and biofuel companies said that the blending program would not work.

Gavin Carpenter, the director of sales and marketing for SeQuential-Pacific Biodiesel, said that under the blending program his company's used-cooking oil biodiesel plant would send most of its product to California because its LCFS values the fuel.

The cost requirement for blending would rule out cellulosic ethanol from Dupont's Iowa plant, a representative of the chemical company said.