By Taylor W. Anderson • The Bulletin

SALEM — Some of the fiercest opponents of the low-carbon fuel standard in Oregon are no longer looking to pressure the Legislature to gut or repeal the program, which lawmakers rescued last year by removing a 2015 sunset date.

After months of political angling that appeared to threaten a transportation package in 2017, some of the law’s harshest critics, representing the fuel companies most affected, say they will look elsewhere to influence the policy.

Instead, the Oregon Fuels Association will work alongside electric vehicle companies, regulators and a slew of other interest groups on what’s been called Phase 2 of the program, dubbed “Clean Fuels” because it seeks to slightly curb the carbon released from producing and burning gas and diesel and spur the development of electric vehicles.

“Unless there is a dramatic increase in the cost of fuel in the near term … the OFA is looking to be more pragmatic in its approach to this issue, and we are committed to designing a viable (Clean Fuels) cost containment regulation via the administrative process,” said Danelle Romain, a prominent lobbyist with the group representing the fuel providers.

Catherine Reheis-Boyd, president of the Western States Petroleum Association, which has also been a fierce critic of the program, also said the group will look to work with regulators.

“We are seeking clear, concise rules on fuel forecasting and cost containment measures that protect consumers,” she said in a written statement.

That’s welcome news for the policy’s supporters, including Democratic Gov. Kate Brown, and some legislators who have made keeping the program and also passing a transportation package a top issue in the legislative session that begins in February.

Groups opposing the program for months gave lawmakers an ultimatum on gutting it, saying the low-carbon fuel standard will raise the cost of gas and diesel between 4 and 19 cents per gallon or higher but not pay for roads. They threatened to try and repeal the program on the ballot but fell short of signatures and gave up.

The Legislature left it up to the Department of Environmental Quality to shape the program in its early stages. That year of work, which will better define the program and also aim to prevent costs from running away, gets underway Wednesday in Portland.

The DEQ will work with regulated companies to make sure “that any pass-through of costs from the regulated parties to fuel consumers is not unreasonably high.”

Groups subject to the regulations, those that sell gas and diesel in Oregon, and those seeking to profit from the program, such as biofuels and electric vehicle companies, will gather for the first in a series of meetings that all parties say will determine the success of the program.

The Clean Fuels program aims to lower emissions from Oregon’s transportation sector at first by requiring fuel distributors to incorporate more biofuels that are deemed “cleaner,” as rated by a fuel type’s carbon intensity. Carbon intensity is a measure of greenhouse gases released during the entire life cycle of a road fuel, which includes production, transportation and use. It also includes the land used to create biofuel such as ethanol that could otherwise be used to produce food.

The program ratchets up over the coming decade, and companies each year will be required to provide fuel with lower carbon intensity.

As that happens, fuel companies that don’t or can’t meet the low-carbon fuel standards will accrue deficits that must be offset. To do so, those companies can buy credits, which are produced by companies that sell fuel or power vehicles with electricity that has a carbon intensity that is below the standard for a given year.

In the early stages, those credits have been overwhelmingly generated by ethanol companies.

They’ll also focus on whether there will be enough credits generated — and whether the cost of those credits will be low enough — to offset deficits without spiking the cost of traditional fuels.

Cost-containment measures could include a credit marketplace with a capped price. In California, which has a similar low-carbon fuel program, the state created a marketplace where companies that produce credits offer them at a price that’s capped at $200. One credit in the program is equal to one ton of carbon.

“If there’s a risk that credit prices could go so high that the policy could become unstable, that could undermine the program,” said Jeremy Martin, a senior scientist with the Union of Concerned Scientists. “This is really a balancing act to make sure this is administered in a judicious way.”

During that work, regulators will try to ensure that fuel companies that generate deficits will have access to credits that will offset their deficits. But they also will want to make sure there are incentives for providers of low-carbon fuel to enter the market and generate environmental benefit sought by the program.

Regulators are considering allowing transit agencies — such as TriMet in Portland — to generate credits under the program. DEQ believes adding electric light rail and streetcars to the list of credit generators could help transit agencies operate and expand, making more credits available under the program.

They’ll also consider delaying penalties for companies that don’t comply with the standards. DEQ already has delayed the program for deficits accrued through 2017 or 2018, depending on the type of company.

During rule-making, regulators and interest groups will also work to suss out details on credit ownership. It’s not immediately clear, for instance, whether a credit could be generated by a homeowner charging their electric vehicle or the utility supplying the homeowner with electricity.

Electric vehicle companies also are looking for that level of clarity as they hope to use the law and revenue from credits sold to continue expanding the network of charging stations available for what environmental groups hope will be an onslaught of drivers buying electric vehicles.

“We really want to make sure that if there is an opportunity for the charging station operator or owner of a private site to collect that credit, that they continue to have that ability so they can invest that into more stations or services of the station or network fees,” said Anne Smart, director of governmental relations with the electric vehicle company ChargePoint, which also operates in California.

Wednesday’s meeting in Portland kicks of the first of six among stakeholders. DEQ will hold a public hearing in August 2017, and the Environmental Quality Commission will consider adopting new rules for the program in November 2017.

— Reporter: 406-589-4347,

tanderson@bendbulletin.com

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