California backs fuel standard that could raise costs

Jill Dunn | February 03, 2012

States considering a Low Carbon Fuel Standard will be watching the federal 9th Circuit Court of Appeals to see if it will overturn a lower court’s decision against allowing enforcement of the standard that opponents say will significantly hike fuel costs.

The appellate court has set an April 16 deadline for the California Air Resources Board to file its opening brief after the U.S. District Court for the Eastern District of California court refused to suspend judgments and a preliminary injunction Jan. 23 against CARB enforcing the standard.

Two years ago, the American Trucking Associations, refiners and fuel production companies filed suit against the board’s LCFS, which began last year and had been set to become significantly stricter in January and again in 2015..

Six weeks ago, the Western States Petroleum Association and the California Trucking Association issued separate statements expressing concern over projected fuel cost hikes resulting from LCFS.

Michael Shaw, a CTA vice president, said it would jack up fuel prices in the short term and could create fuel shortages in the long term.

“The California Energy Commission tagged the LCFS with an annual cost to California of more than $4 billion,” Shaw said. “How can CARB impose a major drag on our economy at a time when California’s unemployment rate still hovers at almost 12 percent?”

Western States Petroleum Association cited research it commissioned from the California-based Sierra Research, based on Department of Energy biofuel forecasts.

California biofuel supplies will be inadequate for LCFS compliance by 2015 when the fuel requirements “start to become much more aggressive,” the WSPA stated. The cost of acquiring special biofuels in California for LCFS compliance “could be as much as $54 billion between now and 2020.”

On Dec. 29, U.S. District Judge Lawrence O’Neill ruled the state’s LCFS violated the Constitution’s Commerce Clause by discriminating against out-of-state sources of ethanol and crude oil. In response to a 2006 state law, the board adopted LCFS three years later to reduce greenhouse gas emissions from transportation fuels 10 percent by 2020.

Several West Coast and New England states that considered adopting California’s standard in recent years appear to be holding off on implementation.