Energy Exchange

By Tim O’Connor and Larissa Koehler

Last week, we saw a big win for California’s Low Carbon Fuel Standard (LCFS) – a regulation to diversify the state’s fuel mix with lower carbon sources of energy. After almost a year of deliberation, the United States 9^th Circuit Court of Appeals filed a decision in the case Rocky Mountain Farmers Union, et al. v. Corey, in favor of California.

In its 79-page decision, the Court addressed two major constitutional issues: 1) whether the LCFS was invalid because it directly regulated wholly out-of-state ethanol producers (extraterritoriality); and 2) whether the LCFS was invalid because it impermissibly discriminated against out-of-state producers based solely on origin, thereby violating the Commerce Clause. The court overturned a District Court ruling on both grounds, finding that the state can move forward with the LCFS unimpeded. Of course, the ruling is only a temporary win for California, as additional legal process at the District court — and possibly U.S. Supreme Court — is forthcoming.

Although not required to do so, the Court of Appeals went to great lengths to recognize the importance of California’s leadership in developing and implementing environmental policy. The Court said it did not wish to “block California from developing this innovative, nondiscriminatory regulation to impede global warming… [as] it will help ease California’s climate risks and inform other states as they attempt to confront similar challenges.”

These words of support for the LCFS and California’s leadership are supported by tremendous growth in alternative fuels industries like California biodiesel, and also by analysis that shows fuel diversification can yield long-term price reductions at the pump. The 9^th Circuit’s decision which allows these trends to continue is not just a win for the state in a long legal battle, but also a win for California’s consumers and environment.

Source: Julia Schmalz/Bloomberg

After being caught off guard by the early winds of the shale gale, Pennsylvania officials have been in a near-constant state of regulatory and legislative activity for the last few years, working to put rules in place to reduce the risks posed by the increase in natural gas development.  We’ve given PA high marks on some of those efforts, and we’ve disagreed strenuously with others.  But we believe in giving credit where credit is due – and the Keystone State certainly deserves credit for the long hours that officials and stakeholders have devoted to improving regulations.

In some critical areas, such as reducing air pollution from leaky equipment located at natural gas processing plants and compressor stations, the Bureau of Air Quality at the Pennsylvania Department of Environmental Protection (DEP) has demonstrated real leadership.

Now, DEP has revised its technical guidance document known as Exemption 38, narrowing the eligibility criteria for the air quality permit exemption.  Astonishingly, under the previous version almost all oil and gas production facilities were exempted from the state’s air quality requirements. Past guidance for Exemption 38 considered well sites and all the equipment associated with them to be “minor sources” – even though they can individually contribute to poor air quality conditions, particularly in densely populated areas.   In Pennsylvania 90 percent of wells are concentrated in ten counties, with just three counties accounting for 50 percent of all wells.  Without proper pollution controls and monitoring, this intensive development can easily lead to unhealthy local air quality. Read More »

Some hope is on the horizon as more evidence shows the 12 biggest refineries in California are exploring and undertaking large energy efficiency improvements.

A recently released ARB report points out that these investments will save money, decrease greenhouse gas (GHG) emissions, and reduce air pollution. Of course, many of them come with a hefty price tag – even by oil industry standards – but they are also yielding outsized benefits.

In the report, the California Air Resources Board (CARB) identified 401 energy efficiency opportunities that are completed, ongoing, scheduled or under consideration at the state’s biggest polluters. Most of these investments have been undertaken since 2009 – the first year following the adoption of California’s AB 32 Scoping Plan, a blueprint for reducing emissions throughout the economy.

In total, these projects would reduce GHG emissions from these 12 facilities by 2.78MMT CO₂e annually, about 9% of their statewide total for climate change pollution. In addition, these improvements would create individual net savings of up to $25 million annually. What’s more, these savings estimates do not include the benefit these companies get from having to secure fewer allowances in the state’s landmark cap-and-trade market – worth another $50 million a year at a forecasted carbon price of $18 a ton.

As we wrote earlier, annual data released by CARB shows that many of these 12 refineries’ emissions have been decreasing every year from 2008-2011, and the 401 energy efficiency projects are likely part of the reason. To support this, data on individual firms shows that almost all of the state’s facilities have either taken part in the efficiency improvement process or are in the stages of doing it soon.

Out of the 401 opportunities, nearly 80% of the emissions reductions have been completed or will be in the next few years. Another 7% are scheduled and 15% are under consideration. The majority of improvements are from equipment upgrades, adapting new technologies, and from changing processes such as reducing steam usage, improving boiler function, and changing equipment duty cycles.

Valero’s Benicia refinery, one of the 12, has identified 43 projects that are completed or currently underway, with a 7% annual GHG emission reduction. These improvements are mostly through new steam boilers or other new electric equipment. These upgrades also have a less than two year payback period, with an annual cost savings of $16 million.

Figure 1.

These findings confirm a 2010-2012 DOE Industrial Assessment Centers audit, which found that large industrial facilities had an average of 16% electricity cost savings available from energy efficiency upgrades, a 3% increase from the 2006 audit’s findings. This demonstrates that innovation and technology are constantly improving and savings opportunities continue to emerge.

Of course, refineries aren’t just giving themselves a chance save money from reduced energy or carbon credit purchases when they invest in efficiency. They’re helping reduce the poorest air quality and highest asthma rates — in communities located right next door to them.

As CARB’s report shows, improvements to cut GHGs at refineries have the double benefit of cutting the release rates of hazardous chemicals and pollutants that make people sick – since refining oil is a process that inherently causes harmful pollutants to be released.

Altogether, this new data proves AB 32 is working, not just for the health of the planet by fighting climate change, but for the public health of California.