Washington state considers LCFS compliance delay

Washington state may delay compliance requirements for the first year of its low-carbon Clean Fuel Standard expected to launch in 2023, regulators said today

Deferring compliance would give the new program a year to test its credit tracking and reporting systems but delay the carbon-intensity reductions and credit revenue sought by supporters of the latest west coast low-carbon fuel standard (LCFS).

The Department of Ecology today sought comments on the idea from fuel suppliers, renewable fuel producers and other stakeholders in the first public rulemaking meeting on the program. The agency must make other key choices, including whether to include carbon capture or refinery upgrade projects, how to interpret requirements to increase in-state biofuels production and how to manage credits from electric vehicle (EV) chargers.

Washington's Clean Fuel Standard would reduce the carbon intensity of state transportation fuels by awarding credits to low-carbon fuels and assigning deficits to higher-carbon petroleum fuels. Fuel suppliers must acquire credits to offset deficits in a given compliance year. Deficits associated with conventional fuels grow as total allowed emissions levels fall each year. Washington would start out by targeting a 10pc carbon intensity reduction by 2032 to reduce emissions from 2017 levels.

That would include 0.5pc reductions in 2023 and 2024. Regulators asked stakeholders today for opinions on making 2023 a "report-only" year, in which fuel suppliers filed credits and deficits but obligated parties faced no annual compliance requirements.

Washington could instead require a 1pc reduction in 2024, require parties meet only a 0.5pc reduction for the fourth quarter of 2023, or push the reductions out to 2034 or beyond. That would likely affect the price of state LCFS credits and associated incentives to supply Washington with renewable fuels.

Regulators must also determine how to apply requirements in Washington law that the program cannot continue beyond the 10pc carbon intensity reduction until the state adds 3,900 b/d of in-state renewable fuel production and ensures that 15pc of renewable feedstocks come from Washington sources. The agency must also decide whether to include co-processing projects, such as BP Cherry Point's recently announced expansion of renewable diesel capacity.

Stakeholders today quizzed regulators on how the standard will align with neighboring programs and generate credits.

Washington expects its carbon intensity pathways to look more like Oregon's than California's, agency staff said. The state's refineries tend to supply Oregon, and the two states have more similar supply routes — and so similar emissions from moving fuel to customers — than the options available to California.

Stakeholders also questioned requirements to allow EV chargers to generate credits based on capacity, rather than use. The agency wanted feedback on whether a cap would be needed for such sites to ensure built but unused EV chargers flooding the market with credits.

At least one respondent opposed Washington's consideration of charging a fee to participate in the program. California and Oregon do not charge fees to generate credits.

"A pay-to-play approach is really counterproductive to the intent of the program," said Todd Trauman, a chief executive at zero emission vehicle consultancy e-Mission Control.

The Department of Ecology plans at least three more meetings through the first quarter of next year ahead of releasing a proposed rule by next summer. The next was scheduled for 16 November.

By Elliott Blackburn