By Carolyn Whetzel

Reprinted from Bloomberg BNA

LOS ANGELES—California air quality officials Jan. 27 adopted new standards requiring automobile manufacturers, over the next 13 years, to reduce ozone-forming emissions from cars and light-duty trucks by 75 percent from 2014 levels and put 1.4 million plug-in hybrids, battery electric, and fuel cell vehicles on the road.

Approved 9-0 by the California Air Resources Board, the regulatory package includes a rule to phase in stricter fleet average standards for 2015-2025 model year cars and light-duty trucks to further reduce nitrogen oxide and hydrocarbon emissions, increase engine durability requirements from 120,000 miles to 150,000 miles, and impose new particulate emissions on gasoline cars.

A second rule puts in place a new round of greenhouse gas emissions standards for 2017-2025 model year cars and light-duty trucks. CARB’s new regulations set a 166 gram of carbon dioxide equivalent per mile limit, which the agency said will curb greenhouse gases 4.6 percent a year, or 34 percent from 2016 to 2025.

The new regulations ushered in what appears to be a new era of cooperation between automakers and the agency, one rooted in the negotiations that led to the agreement on nationwide greenhouse gas standards for cars and stricter fuel economy standards finalized by the Obama administration in 2010 (62 DEN A-7, 4/2/10).

The regulatory package, collectively called the Advanced Clean Cars Program, still must be approved by the California Office of Administrative Law and the Environmental Protection Agency.

Automakers Support Rules

Automakers testifying at the public hearing that preceded the board’s vote voiced strong support for the rules even though they called on CARB to tweak various provisions in the regulations.

Generally, the industry urged CARB to continue ongoing efforts to harmonize the state’s testing and certification requirements with those of the Environmental Protection Agency.

CARB Deputy Executive Officer Tom Cackette told Bloomberg BNA the two agencies are close in achieving that goal.

“The level of consensus on the importance of the program was the highest we’ve ever seen,” CARB Chairman Mary D. Nichols said in a news conference following the vote.

Environmental and public health advocates also voiced strong support for the rule package and encouraged CARB to closely monitor automakers’ compliance.

The Advanced Clean Car Program “represents a new chapter for clean cars in California and the nation as a whole,” Nichols said “It’s going to be an exciting time in the next few years as we see manufacturers roll out these new cars.”

Groups Praise Program

A coalition of environmental, consumer groups, citizens, and public health groups called the California Clean Cars Campaign praised passage of the rules.

“The new standards will save consumers money, cut dangerous air pollution, and support the creation of new jobs and investment in the fast-growing clean energy economy,” the group said in written statement.

In his testimony, Jack Gilles of the Consumer Federation of America cited surveys from Consumer Reports showing broad support for California regulations that reduce greenhouse gases and increase fuel economy.

“Consumers understand the benefits and have consistently voiced support of California’s leadership on clean car standards,” Gilles said. “In fact, CFA’s latest poll found that more than 70 percent of Americans support states being allowed to continue setting tailpipe emission standards that, as a result, increase fuel economy for motor vehicles.”

Greenhouse Gas Rule

CARB will amend the greenhouse gas emissions rule to allow automakers compliant with federal standards being promulgated by the Obama administration to meet the state’s requirements.

California’s greenhouse gas rules rely on off-the-shelf technologies, including variable valve controls, direct injection, turbochargers, cylinder deactivation, engine stop-start, low-emitting refrigerants for air conditioning systems, and improvements in transmissions.

Nichols said the final federal standards must be consistent with those proposed by EPA and the National Highway Traffic Safety Administration, which would translate to an average fleet standard of 54.5 miles per gallon by 2025 (76 Fed. Reg. 74,854; 222 DEN A-7, 11/17/11).

Changes to Zero-Emission Rule

CARB also approved amendments to landmark 1990 zero-emission vehicle rule to ensure that at least 15.4 percent of the cars on the state’s road in 2025 are a mix of advanced technologies.

The changes become more stringent for 2018 model year vehicles and beyond to push for “pure” zero-emission vehicles such as plug-in hybrids, battery electric, and fuel cell vehicles. Specifically, the amendments end the opportunity for automakers to earn ZEV credits for near-zero emission cars such as any of the current generation of gas-electric hybrids and those with clean gasoline engines.

CARB also agreed to continue a “travel” provision allowing automakers to pool sales of zero-emission in other states with similar rules to meet California’s requirement. States so far with zero-emission rules are Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island, and Vermont.

Several automobile manufacturers and environmental groups sought to convince CARB to abandon a provision in the amendments allowing automakers who over-comply with the national greenhouse gas standard to satisfy ZEV requirements between 2018 and 2021. Automakers that make the highest volume of fuel-efficient cars would be able to earn credits to satisfy the ZEV requirements.

Concerns About Over-Compliance Provision

Industry representatives called the provision unfair, and environmental and public interest groups expressed concern that it would result in the introduction of fewer zero-emission vehicles.

CARB’s Cackette told Bloomberg BNA that American Honda Motor Co. Inc. and Hyundai were the two most likely automakers to benefit from the over-compliance provision because both companies produce a large volume of fuel efficient vehicles.

Steve Douglas of the Alliance of Automobile Manufacturers argued that all the companies should be held to standard for investing in zero-emission vehicles.

Individual CARB members were swayed by the concerns raised, but Nichols explained that the provision grew out of the negotiations for the nationwide program and she was unwilling to jeopardize that agreement.

In the end, the board agreed to provide some procedural requirements to the provision requiring automakers that opt for the over-compliance route to submit additional data to ensure the agency’s goals for 2025 would be met.

Clean Fuels Outlet Rule

A measure designed to ensure a hydrogen fueling infrastructure for the growing number of fuel-cell vehicles the state hopes will be introduced drew fire from the oil industry and a threatened lawsuit.

Called the Clean Fuels Outlet rule, the measure would require oil companies to invest in building hydrogen fuel facilities and offer existing gasoline stations incentives to welcome the new type of fuel service.

The Western States Petroleum Association (WSPA) and many small business groups testifying at the hearing challenged CARB’s authority for such a mandate. The industry is working with CARB to negotiate an agreement to pursue public funds for loan guarantees to make such investments.

WSPA President Cathy Reheis-Boyd told Bloomberg BNA that a lawsuit “was highly likely.” Reheis-Boyd said the rule is unconstitutional and violates the Commerce Clause of the U.S. Constitution.

Nichols said she hopes the industry will continue to negotiate with the agency. The clean fuel facilities are necessary for mass production of fuel-cell vehicles, she said.

“The future lies in these advanced vehicles,” Nichols said.

For More Information

The proposed rule package of the California Advanced Clean Cars Program is available athttp://www.arb.ca.gov/board/books/2012/012612/start1.pdf.

Reprinted from the San Diego Union Tribune

FRESNO, Calif. — California officials say they will ask a federal judge to stay his ruling that blocks the state from enforcing the first-in-the-nation mandate for cleaner, low-carbon fuels.

In a decision issued Thursday, Fresno-based U.S. District Court Judge Lawrence O’Neill said the low-carbon fuel rules favor biofuels produced in the state. He said that violates the U.S. Constitution’s commerce clause by discriminating against crude oil and biofuels producers located outside California.

California Air Resources Board spokesman Dave Clegern disagreed, saying the fuel rule is “an evenhanded standard that encourages the use of cleaner low carbon fuels by regulating fuel-providers in California.”

He said the board plans to ask the judge to stay the ruling, and appeal if necessary to the 9th U.S. Circuit Court of Appeals.

Out-of-state fuels producers hailed the decision as a win for California drivers.

“Today’s decision … struck down a misguided policy that would have resulted in even higher fuel costs for Californian consumers while increasing the cost of business throughout the state,” Consumer Energy Alliance Executive Vice President Michael Whatley said.

Beginning this year, the standard has required petroleum refiners, companies that blend fuel and distributors to gradually increase the cleanliness of the fuel they sell in California.

The board previously had said the low-carbon mandate will reduce California’s dependence on petroleum by 20 percent and account for one-tenth of the state’s goal to cut greenhouse gas emissions by 2020.

The regulation does not mandate specific alternative fuels. Rather, it assigns a so-called carbon-intensity score to various fuels. By 2020 all vehicles fuels, on average, must be 10 percent less carbon-intensive than gasoline is now.

The Rocky Mountain Farmers Union, the California Dairy Campaign, the Renewable Fuels Associations and other groups filed a similar lawsuit in the same court in 2009. Their complaint said the regulation conflicted with the federal Renewable Fuel Standard and would close California’s borders to corn ethanol made in other states.

The fuel standard “discriminates against out-of-state and foreign crude oil while giving an economic advantage to in-state crude oil,” O’Neil wrote Thursday.

The nonprofit legal organization Earthjustice, which was not party to the suit but works on climate-related issues, said the state’s clean energy programs are consistent with federal law.

“California is leading the way on cleaner fuels and a cleaner power grid,” Earthjustice President Trip Van Noppen said. “It is not surprising that the oil industry is attacking these programs, but like previous attacks in the courts and at the ballot box, we expect this one ultimately to fail.”

—–

Associated Press writer Jason Dearen contributed to this report.

The Associated Press

By Lynn Doan - Dec 16, 2011 3:27 PM PT

California passed rules discouraging the state’s refiners, including Chevron Corp. (CVX) and Tesoro Corp. (TSO), from processing types of crude that release more carbon when produced and delivered, such as output from Canada’s oil sands.

The regulation, approved as a change to the state’s low- carbon fuel standard, assigns “carbon-intensity” values to about 250 types of crude oil, favoring those that take less energy to produce and transport. Next year, companies will have to cut their carbon scores on a statewide average and potentially on a refinery-by-refinery basis.

Refineries have fought high-carbon crude regulation since the state approved it in 2009, saying the rules are anti- competitive and compound other costly measures under the low- carbon fuel standard and the state’s cap-and-trade program.

The standard, the first of its kind in the country, seeks to cut the carbon-intensity of transportation fuels 10 percent by 2020.

“The mission of these rules is to use less of that carbon- intensive stuff,” Dave Clegern, a spokesman for the state California Air Resources Board, said in a telephone interview from Sacramento. “This will hopefully help us keep a wide variety of crudes available but create deficits with the dirtier kinds.”

While the air board estimates that higher-carbon crudes are a small part of California’s refining mix, imports from outside Alaska and Central California have been climbing since 1999, state Energy Commission figures show.

Alaskan Crude

Crude-oil production in Alaska has declined every year since 2002. California oil production has fallen for the last 13 years. Alaska has historically been the largest source of non- Californian oil in the state.

The percentage of non-Alaskan oil imported to California refiners made up almost half of the crude processed in the state last year, according to the energy commission.

The air board’s new rules “are in anticipation of a time when more might come in,” Stanley Young, a board spokesman in Sacramento, said in a telephone interview.

The regulation will raise the costs of refining in California and eventually boost retail gasoline and diesel prices, David Hackett, president of energy consultant Stillwater Associates in Irvine, California, said in a telephone interview.

“After Alaska, you’d rather get the rest from Canada next door than from Saudi Arabia halfway around the world,” Hackett said. “But these rules make it so you can’t use that dirty Canadian stuff.”

Refiner Opposition

The Western States Petroleum Association, which represents California’s major refiners including BP Plc (BP/), Chevron and Exxon Mobil Corp. (XOM) and Tesoro, is lobbying the air board to change the rules in a way that doesn’t differentiate between crude types.

The individual scoring imposes “a very limiting, inflexible provision” for refineries that are designed to run off heavy oil, Catherine Reheis-Boyd, the group’s president, said in a telephone interview from Sacramento.

“This one I scratch my head at,” Reheis-Boyd said. “Canada has been very clear that they will develop oil sands and put them on boats to China and India, and it’ll be burned in much less-efficient refineries than we have here in California. So the rule doesn’t achieve any of the goals it wants to anyway.”

The association is fighting against provisions in the fuel standard that forces refiners to blend increasingly more low- carbon biofuels into gasoline. Biofuels, particularly sugar cane and cellulosic ethanol, required to meet the standard will surpass supplies in 2015, a report commissioned by the association shows.

The Air Resources Board “likes to go out and make these rosy projections,” Scott Folwarkow, a governmental affairs director for Valero, said in a telephone interview from Sacramento. “They’ve got all these different scenarios they think might work, but in reality, they throw caution to the wind and hope to address deficiencies at a later time.”

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net