Premiums yet to spur Oregon diesel overhaul
Oregon lacks the storage and transportation capacity to quickly increase renewable diesel use, trucking and fuel companies have warned as state-driven demand for the fuel has climbed.
Businesses described insufficient access to the fuel as the state considered additional mandates for low-carbon diesel. Oregon's low-carbon fuel standard (LCFS) program credit bank has drained as the state's sustained premium to the California market has not yet driven a boost in supply.
"We have people that want it, so it's not from a sense of not wanting the program to go forward," said Jeff Rouse, executive vice president of Oregon fuels and lubricants supplier Carson. "For us, it just really does absolutely come down to supply."
State legislators held hearings this month on a proposal to effectively mandate renewable diesel. Oregon trucking and fuel distribution associations said renewable diesel demand was rising, but not its availability. New mandates could impede their operations, they said.
Oregon lacks the storage, delivery and, ultimately, market size of neighboring California, market participants said. Oregon's total diesel demand was roughly a quarter of California's through the first nine months of 2022.
Federal labeling requirements and state credit programs require segregating renewable diesel volumes from petroleum diesel to precisely track blending. That means renewable diesel that is chemically identical to petroleum diesel needs distinct storage tanks added through construction or conversion of petroleum infrastructure. Without the tanks, truck transportation of the fuel from Portland-area terminals makes renewable diesel uncompetitive with petroleum diesel volumes shipped south across Kinder Morgan's 114-mile Oregon Line connecting Portland to Eugene.
Kinder Morgan could move batches of renewable diesel on the pipeline system with adequate supporting storage along the route, Daniel Sanborn, the company's vice president of business development and regulatory affairs for products pipelines, told Argus.
"We continue to look for opportunities with our customers to convert petroleum-based diesel tankage to renewable diesel tankage to accommodate those moves," Sanborn said.
Premium grade
Both Oregon and California operate LCFS markets — state programs that use penalties on petroleum fuels to promote lower-carbon alternatives. The programs have enticed new renewable diesel production, biomethane harvesting and support electric vehicle charging infrastructure.
California's LCFS has over the past decade driven the share of petroleum diesel in the state's fuel supply down to nearly half, as renewable diesel and biodiesel blends take hold.
The value of Oregon's Clean Fuels Program credits moved to a premium to California's LCFS nearly a year ago. Removing a metric tonne of carbon from Oregon transportation fuels generated a credit worth at least $50/t more than the same credit in the California program since September last year, as a glut of credits in the larger state's program has weighed on LCFS prices. Oregon-approved soybean-based renewable diesel — which offers the smallest carbon reduction and fewest credits among approved Oregon renewable diesel feedstocks — averaged a 39¢/USG premium in Oregon in 2022, and has averaged a nearly 42¢/USG premium this year so far.
Oregon lacks the cap-and-trade costs that factor into decisions to supply fuel to California and Washington. Carbon costs associated with the program cut Oregon's premium to California by an average 22¢/USG in 2022.
The premium has yet to attract the infrastructure investments needed to overcome the physical supply hurdles. Even with the difference in incentives, California consumed more renewable diesel in three days than Oregon used for the entire third quarter. Oregon reported more deficits than credits in the first three quarters of 2022.
California has demonstrated that LCFS programs will drive the changes needed to adopt low-carbon fuels, Oregon Department of Environmental Quality market analyst Bill Peters said in response to questions on the shrinking credit reserve.
"Our targets will be increasing rapidly over the next few years," Peters said, "and we fully expect that fuel suppliers will make the changes in supply and distribution that they need in order to comply with our clean fuels standards."
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Beccs revenues 'dependent on sustainability'
Beccs revenues 'dependent on sustainability'
London, 3 May (Argus) — Danish state-controlled utility Orsted and UK utility Drax are increasingly dependent on sustainability criteria for their revenue streams from carbon removal (CDR) credit sales from bioenergy with carbon capture and storage (Beccs) projects, delegates heard at the Argus Biomass conference in London last week. "The key to be able to create such a project is to secure finance, which actually comes from the sale of carbon removal certificates," Orsted senior lead business developer for CCS David Fich said. Adding that the ability of companies to prove the sustainability of the biomass they source was now key to securing financing — including from CDR — for Beccs, and not only a matter of communicating that bioenergy and Beccs were environmentally friendly and carbon neutral businesses. Drax commercial director Angela Hepworth agreed: "Sustainability here is not a nice-to-have, this is the very foundation of our licence to upgrade and our ability to sell the credits and enable us to progress in these projects." Aligned standards within the industry and stronger incentives would encourage corporates to buy carbon credits against reputation backlashes, Hepworth added. Drax and Swedish utility Stockholm Exergi commissioned a methodology for measuring the net CO2 removal through Beccs published in October 2023, which was overall well-received by market participants. The utilities also presented it to the European Commission in the same month. A standardised approach to Beccs would encourage smaller buyers, which rely on certifications to identify the sustainable criteria of the carbon removal value chain when purchasing CDR credits, Fich said. While most larger corporates were doing their own due diligence. "The smaller buyers are those that are able to pay more," Fich said, adding that these companies were necessary to improve the liquidity of the market. Orsted signed a contract with Microsoft in May 2023 for the purchase of 2.76mn t of carbon removals over the next 10 years. Drax is also selling CDR certificates in the voluntary carbon market](https://direct.argusmedia.com/newsandanalysis/article/2441200) and is hoping to get the credits into the UK's trading scheme. Such deals "will help to make Beccs credits be seen in the more mainstream markets," Hepworth said. By Marta Imarisio Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Oregon renewable diesel pours into CFP bank
Oregon renewable diesel pours into CFP bank
Houston, 2 May (Argus) — Rising renewable diesel deliveries helped grow the volume of Oregon Clean Fuels Program (CFP) credits available for future compliance by a record 30pc in the fourth quarter of 2023, according to state data released today. The roughly 253,000 metric tonne (t) increase in available credits from the previous quarter — bringing the total to 1.1mn t — illustrates the spreading influence of US renewable diesel capacity on markets offering the most incentives for their output. California and Oregon low-carbon fuel standard (LCFS) credit prices have tumbled as renewable diesel deliveries generate a surge of credits in excess of immediate deficit needs. LCFS credits do not expire. LCFS programs require yearly reductions to transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the market of approved, lower-carbon alternatives. Renewable diesel volumes in Oregon increased by 12pc from the previous quarter to about 37,000 b/d — more than double the volume reported in the fourth quarter of 2022. The fuel represented 24pc of the Oregon liquid diesel pool for the period, while petroleum diesel fell to 75pc. Renewable diesel generated 46pc of all new credits for the quarter, compared to the 14pc from the next-highest contributor, biodiesel. Deficit generation meanwhile shrank from the previous quarter. Gasoline deficits fell by 6.6pc from the third quarter as consumption fell by roughly the same amount. Gasoline use trailed the fourth quarter of 2022 by 7.1pc. Diesel deficits also shrank as renewable alternatives push it out of the Oregon market. Petroleum diesel deficits fell by 19pc from the previous quarter and consumption was 27pc lower than the fourth quarter of 2022. Spot Oregon credits have fallen by half since late September, when state data offered the first indications that renewable diesel that was already inundating the California market had found its way to the smaller Oregon pool. The quarter marks the first time Oregon credits available for future compliance have exceeded 1mn t. Oregon in 2022 approved program targets extending into next decade that target a 20pc reduction by 2030 and a 37pc reduction by 2035. An ongoing rulemaking process this year will consider changes to how the state calculates the carbon intensity of fuels and verifies the activity of participants, but will not touch annual targets. By Elliott Blackburn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US southbound barge demand falls off earlier than usual
US southbound barge demand falls off earlier than usual
Houston, 1 May (Argus) — Southbound barge rates in the US have fallen on unseasonably low demand because of increased competition in the international grain market. Rates for voyages down river have deteriorated to "unsustainable" levels, said American Commercial Barge Line. Southbound rates declined in April to an average tariff of 284pc across all rivers this April, according to the US Department of Agriculture (USDA), which is below breakeven levels for many barge carriers. Rates typically do not fall below a 300pc tariff until May or June. Southbound freight values for May are expected to hold steady or move lower, said sources this week. Southbound activity has increased recently because of the low rates, but not enough to push prices up. The US has already sold 84pc of its forecast corn exports and 89pc of forecast soybean exports with only five months left until the end of the corn and soybean marketing year, according to the USDA. US corn and soybean prices have come down since the beginning of the year in order to stay competitive with other origins. The USDA lowered its forecast for US soybean exports by 545,000t in its April report as soybeans from Brazil and Argentina were more competitively priced. US farmers are holding onto more of their harvest from last year because of low crop prices, curbing exports. Prompt CBOT corn futures averaged $435/bushel in April, down 34pc from April 2023. Weak southbound demand could last until fall when the US enters harvest season and exports ramp up southbound barge demand. Major agriculture-producing countries such as Argentina and Brazil are expected to export their grain harvest before the US. Brazil has finished planting corn on time . unlike last year. The US may face less competition from Brazil in the fall as a result. Carriers are tying up barges earlier than usual to avoid losses on southbound barge voyages. Carriers that have already parked their barges will take their time re-entering the market unless tariffs become profitable again. The carriers who remain on the river will gain more southbound market share and possibly more northbound spot interest. By Meghan Yoyotte and Eduardo Gonzalez Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Norwegian Cruise swings to 1Q profit
Norwegian Cruise swings to 1Q profit
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