OPIS Biofuels News

U.S. Closing Gap on Rest of World Regarding RNG Development: Official

October 13, 2022

NEW YORK -- Other parts of the world are ahead of the U.S. when it comes to renewable natural gas (RNG), but the country is closing the gap, the head of an organization focused on the fuel said this week.

"In terms of number of projects, certainly Europe is miles ahead," Matt Tomich, president of nonprofit environmental group Energy Vision, told OPIS. "But the U.S. is catching up."

Tomich, speaking at an event at which the organization distributed environmental leadership awards, said that the U.S. has more than 250 operational RNG projects, at least 115 more under development and "the potential for thousands of projects to be developed over the next decade."

The U.S. has an opportunity to play a leadership role globally in the endeavor, Tomich said, especially with a large agricultural industry and an extensive network of gas transmission.

"It lends itself to scaling RNG quickly," he added.

Technology developed in Europe often gets commercialized in the U.S., Tomich said, and "there's no reason to believe that that can't happen with RNG; that seems to be the trajectory that that we're starting to be on."

"I have high confidence in the ability of this country to take the lead with all of the innovation and entrepreneurship and commercial success that we've seen in other industries," he added. "The U.S. is poised to be a leader."

Tomich cited the Inflation Reduction Act (IRA) and "the role that that can and likely will play in making this an attractive investment that is largely de-risked."

He lauded steps taken by the Biden Administration.

"Not necessarily speaking specifically to RNG, but the incentive structures and opportunities that are provided by Build Back Better and the IRA are the best we've ever seen," he said.

"RNG and biogas are included and the tax incentives plus clean fuel production credits that will apply to RNG make this a very attractive investment opportunity for the next decade," he added. "Treasury has not yet come out with guidance, but based on what's in the legislation, all things RNG and biogas are supported to a great degree and that alone is a far cry from where we were a few years ago."

Tomich referred to several states or regions that have been seeking the possibility of establishing low carbon fuel standard (LCFS) programs like the ones out west.

"It is certainly a priority here in New York," he said. "It's being considered and pursued in New Jersey. In the Upper Midwest, there's an effort, and there are efforts in New Mexico.

"Today, it is really the West Coast that has the existing programs driving the opportunities. Our hope is certainly that others follow suit."

Tomich said that hopes for the development of a national LCFS program are "perhaps ambitious at this point," but said such a move "could in effect replace the Renewable Fuel Standard over time."

"It's our hope that that comes to fruition, sooner rather than later," he added.

In the meantime, there is potential for RNG to grow significantly, according to Tomich.

"If you look at sort of the technical potential based on the feedstock and known existing technology," he said, "the opportunity is 20 times at least what it is today in terms of production potential domestically."

--Reporting by Michael Schneider, mschneider@opisnet.com
--Editing by Jordan Godwin, jgodwin@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

Biofuels, Refining Industry Executives Decry California ZEV Mandate

September 9, 2022

Representatives for industry groups from the refining and biofuel industries on Thursday decried a rule by California Gov. Gavin Newsom issued late last month that would require sales of new cars and light trucks be solely zero-emissions vehicles (ZEVs) by 2035.

The comments -- expressed on a panel at OPIS' 14th Annual OPIS RFS, RINs & Biofuels Forum -- came after Newsom announced on Aug. 25 that the California Air Resources Board (CARB) had approved the Advanced Clean Cars II rule. The new regulation accelerates requirements that automakers deliver an increasing number of ZEVs each year beginning in model year 2026.

Sales of new ZEVs and plug-in hybrid electric vehicle (PHEVs) will start with 35% that year, build to 68% in 2030 and reach 100% in 2035.

In a panel bringing together several representatives from major refining and biofuel groups -- interests that have long clashed around fuels policy -- Geoff Cooper, president and CEO of the Renewable Fuels Association (RFA) said the rule is likely to sow "disastrous" consequences for those throughout the liquid fuels business.

Cooper expressed concerns over the state's ability to meet such a target within
13 years, noting that, "the closer you get to that date, the more effort there will be to relax, water down or delay some of those overly ambitious and unrealistic requirements."

He was joined in that sentiment by Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute (API), who said the move by Newsom is likely to result in less abundant sources of energy, less choice, and higher costs for Californians.

"You would think the best way to get to achievable targets was to expand consumer choice, not reduce it," Macchiarola said.

He added that the group would prefer a policy that places a price on carbon emissions.

Cooper also pushed back against the state's reasoning behind the move, arguing that the agency is "completely wrong" in believing that a mass expansion of the ZEV market is the only way to reach net-zero carbon emissions statewide by midcentury.

"All of our members are going to be very innovative and find things to drive down their carbon intensity," Cooper said.

Geoff Moody, senior vice president of government relations and policy at the American Fuel & Petrochemical Manufacturers (AFPM), said the ZEV target was an "egregious policy" that should be struck down immediately by the courts.

Moody added that he was concerned over the mandates' initial 35% target beginning in 2026.

And Michael McAdams, president at the Advanced Biofuels Association (ABFA), said that policies should instead be focused on carbon reductions and criticized the "myopia" of those who view ZEV technology as the sole avenue to decarbonizing the transportation sector.

--Reporting by Patrick Newkumet, pnewkumet@opisnet.com

--Editing by Jordan Godwin, jgodwin@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.

CARB Hints at Stronger LCFS Targets in Draft Scoping Plan

May 10, 2022

The California Air Resources Board (CARB) hinted Tuesday that it plans to strengthen Low Carbon Fuel Standard (LCFS) carbon intensity reduction targets, but it stopped short of going into much detail on what those changes might look like.

In its draft 2022 Climate Change Scoping Plan Update, CARB outlined in a 255-page report how it plans to guide the state's transition to carbon neutrality by 2045 or sooner. Within the report, CARB made 15 references to the LCFS and said it plans to "initiate a public process focused on options to increase the stringency and scope of the LCFS."

CARB said it will evaluate and propose accelerated carbon intensity targets pre-2030 for the LCFS. It added that it will evaluate and propose further declines in the LCFS post-2030 carbon intensity targets to align with the Final 2022 Scoping Plan. It also said it will consider integrating opt-in sectors into the program -- something that sustainable aviation fuel (SAF) advocates have urged -- and will provide capacity credits for hydrogen and electricity for heavy-duty fueling.

LCFS stakeholders in January urged CARB to strengthen the LCFS targets, in response to a December meeting during which the agency asked for feedback on what it should do with the targets as part of its 2022 rule-making process.

The LCFS program now requires a 20% reduction in the CI of transportation fuels from the 2010 baseline by 2030, including a 10% reduction this year. However, with California now aspiring to net-zero carbon emissions by 2045, CARB is considering whether it should adopt more aggressive LCFS targets.

At the OPIS LCFS & Carbon Markets Workshop in San Francisco in December, Colin Murphy, deputy director of the Policy Institute for Energy, Environment and the Economy at the University of California, Davis, said the agency needs to raise its 2030 CI-reduction target to 24% and establish a 54% reduction goal by 2035 to ensure it is on a path to achieve carbon neutrality by 2045.

Low-carbon fuel producers have been alarmed in recent months by sagging LCFS prices that they say reduce the financial incentive to bring lower-CI fuels into the state. OPIS' LCFS assessment averaged $177.77/credit in 2021, down from $200.04/credit in 2020. On April 29, OPIS assessed LCFS credits at $107/credit, a four-year low. Market sources say an increase in the number of planned renewable diesel production facilities last year were mostly responsible for the decline in credit prices.

In 2021, the numbered of banked credits ballooned to 9.45 million credits, up 16.3% from the end of 2020, thanks in large part to a fourth quarter in which 975,292 more credits were generated than deficits, the largest quarterly build in program history.

--Reporting by Jordan Godwin, jgodwin@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com

© 2022 Oil Price Information Service, LLC. All rights reserved.