Fuel Rule Could Ripple Upstream

American Association of Petroleum Geologists (AAPG)

In January 2007 California Gov. Arnold Schwarzenegger issued an executive order announcing that California would develop a low carbon fuel standard (LCFS). The purpose of the LCFS is to reduce by at least 10 percent the carbon intensity of fuels used for passenger vehicles in California by 2020.

The governor’s action put the state into the familiar position of crafting unique and occasionally controversial environmental policy. And there is an old saying about these policies:

“As goes California, so goes the world.”

Based on the executive order, the California Air Resources Board is preparing rules to create the LCFS and implement the program. They issued several draft documents in 2008 and expect to complete the proposed rule this month. Implementation would occur in 2010.

The goal of an LCFS is to reduce carbon emissions per mile driven. It is one strategy for reducing carbon emissions from non-point source emitters, such as vehicles. To date, most carbon emission reduction strategies – such as carbon capture and storage – have focused on point sources such as power plants or other stationary sources.

Conceptually, developing a LCFS is a simple process:

  • First, the carbon intensity of the fuels being considered is determined (e.g., gasoline, diesel, natural gas, electricity, potentially others).
  • Second, a base level, typically the emissions output of a previous year, is determined.
  • Third, you set annual reductions for future years to meet the established targets.

In response to such a standard, fuel providers would be forced to lower the carbon intensity of fuels sold and broaden the portfolio of fuels offered. So, for example, fuel providers could lower the carbon intensity of gasoline or diesel by blending it with a lower carbon fuel, such as a biofuel. However, there are limits to these measures, because many auto manufacturers only warranty parts for certain fuel mixtures, which limits adoption. And in many states, including California, there is limited infrastructure to transport and sell these fuels.

Perhaps the biggest challenge is calculating the carbon intensity of these various fuels. Again, the concept is simple enough: You determine tailpipe emissions and then look at all of the upstream emissions, including production, transportation and other secondary outputs. These are the lifecycle emissions of a particular fuel. But it is essential that the methodologies and calculations to derive these emission values are developed in a transparent and open process.

One particular fear is the impact of a LCFS on the development of nontraditional fossil fuel sources, such as from oil sands, oil shale or other “heavy” oil resources. This could not only affect development of these resources in the United States but also existing imports from Canadian oil sands and possibly other nations.

Typically, production of these resources has a higher greenhouse gas footprint than other resources. However, when you compare the full life-cycle emissions, they compare favorably with other petroleum resources.

In fact, according to province of Alberta’s oil sands Web site:

“[W]hen you look at the full life-cycle of emissions associated with a barrel of oil, approximately 80 percent come from tailpipe combustion (cars, trucks, planes, tankers). The remaining 20 percent are associated with production, which includes extraction, transport and refining.

“When you look at the full fuel cycle, Alberta’s oil sands (Canadian SCO Blend) stack up very closely to Saudi Arabian (8.8 percent difference), Mexican (6.9 per cent difference) and Nigerian (4.6 per cent difference) oil in terms of emissions intensity. Alberta is less carbon intensive than Venezuelan oil (2.6 per cent lower).”

California is taking the lead on developing the LCFS, but already several states in the northeastern and western United States have indicated they would follow California’s lead in adopting their own LCFS. And there is talk Congress may consider a federal LCFS standard as part of climate change legislation that it will be working on in the 111th Congress.

Furthermore, President Obama has backed California’s efforts to curb greenhouse gas emissions from vehicles by asking the U.S. Environmental Protection Agency (EPA) to revisit a Bush administration decision to prohibit California from doing so. The EPA is widely expected to reverse its earlier decision.

Clearly, these are issues that could have a significant impact on AAPG members, and we are monitoring the issue closely. Please visit the GEO-DC blog and sign up for our e-mail updates; we’ll keep you apprised as events warrant.

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