A representative of the oil refiners was talking to Gov. Jay Inslee Tuesday about something called the Low Carbon Fuel Standard. Washington doesn’t have a LCFS but California does, and the Golden State’s ideas tend to migrate here. And the oil refiners say the California experience is none too good so far.
The LCFS is explained to me as a rule that alcohol be mixed into gasoline or biodiesel into diesel to lower the percentage of carbon, because carbon heats the Earth. Upon hearing this I said, sure, I’d seen the sticker on the pump where I buy gas. The fuel contains up to 10 percent ethanol. No, no, they said; that’s the federal standard. We can satisfy that by mixing some stuff in. No problem with that. The LCFS is much more complicated.
California’s LCFS wants to know how much carbon was burned to create the ethanol or biodiesel. To calculate that, it wants to know what the feedstock was, how much energy it took to refine it and how far it was moved. This is particularly a problem with ethanol, said Kevin Adams of the Boston Consulting Group, which is working for the Western States Petroleum Association. It means that ethanol from corn, which is the sort of ethanol in the gasoline I buy, doesn’t help you enough. Too much carbon was burned to create it.
Ethanol from Brazilian cane is better, but you have to bring it from Brazil, and Brazil doesn’t produce enough for itself and the United States. It’s not really the answer.
The good stuff is cellulosic ethanol, the sort that can be made from switch grass. Under the LCFS, cellulosic is gold. Put cellulosic into gasoline and the life-cycle carbon count comes down nicely. The problem, says Adams, is that there isn’t enough cellulosic to buy.
Adams says that several years ago, regulators projected U.S. output of cellulosic ethanol in 2014 at 1,800 million gallons. The output in 2013 will be about 5 million gallons. Next year’s estimate has been revised to 17 million gallons, or 1 percent of what was originally forecasted. Five or six plants are being built in California, Adams says, but they are small ones, and it takes a few years to get plants online.
What’s the matter? If California’s government mandates that the refiners buy cellulosic, and forbids unmixed fuel from being sold, why wouldn’t investors produce cellulosic? There’s a guaranteed market. Adams says that by and by, they will, but the technology is more complicated than people thought. Also, investors in renewable fuels have been burned (including here in Washington). Progress is slow.
If Oregon and Washington adopt the California LCFS, Adams says, some refiners will export their product instead of selling it here. Supply will be constrained and prices will go up. They could go up a lot.
That is the message from the petroleum refiners’ consultant. I can already hear the critics: that the refiners are making threats, don’t believe them, stick to the plan, etc. There will be a battle over all that, and it will be fought in California first. Policymakers here need to keep an eye on how the fight goes there, because it will set the parameters of what can be done in Washington.
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