Low-Carbon Fuel Standard Will Bring Extreme Economic Hardship: National Implementation of LCFS Doesn’t Envision a National Debate or Vote of the Legislature

Low-carbon Fuel Standard May Be Closer Than You Think

May 18, 2010

Dailycaller - On the cusp of an immigration debate and sandwiched in between finance reform and hearings on the spill, a Graham-less Kerry-Lieberman (KL) energy bill was finally introduced as the Senate’s initial response to the 2009 House bill. Emission levels have been suggested, a carbon market has been outlined, but provisions included in earlier drafts of House climate legislation relating to what’s called a Low-Carbon Fuel Standard (LCFS) failed to make the grade.

While they may not know it yet, the decision to leave the LCFS on the cutting room floor is a rare spot of good news for a broke and broken American public. After all, ever since the governor of California signed an executive order in 2007 setting his state down the LCFS path, those of us who have seen this movie before began to brace for the inevitable national standard from Washington—part of the less-than-implicit pact we have with the world’s eighth largest economy to bail it out anytime it bites off a mandate too big for it to chew.

But given a second glance at the legislative movement taking place throughout the country, perhaps we’ve been duped. True, it’s unlikely that an LCFS will be resurrected as part of the Kerry-Lieberman bill. But that doesn’t mean it’s prepared to stay in the grave forever. Right now, in more than 20 states across the country, efforts are under way to copy the California model and paste it into statute—with or without the consent of the legislature. And while you may think you’d be safe if you happen to live in one of the remaining 30 states, it’s time to think again.

Regarded as something of a misnomer to many, the Low-Carbon Fuel Standard doesn’t actually seek to lower the carbon content of fuels in our tank—since that, according to EPA, would violate the laws of fuel science. Instead, the LCFS seeks to prevent some sources of reliable, affordable petroleum from being converted into things such as gasoline, diesel fuel, kerosene and heating oil. Cut the supply of these resources, the thinking goes, and lower-carbon alternatives will arrive on the market to replace them—even if they’re currently considered decades away from commercial realization.

Unfortunately, these facts have been lost on California, which has since approved an LCFS and is so far along in the implementation process that it is expected to unveil by late 2010 the screening process it will employ on crude oils used in the state. In other words, only a few finishing touches are standing in the way of a fully-enforceable LCFS law.

The rest of the West Coast has caught on as well. In Washington, final recommendations on the provisions of the state’s LCFS are due to the Department of Ecology by November. And in Oregon, proposed changes to House Bill 2186, which would enact an LCFS there, are due by year’s end. So if all goes as planned, the entire western coast could be under an LCFS regime before the ball drops on 2011.

The story on the east coast isn’t turning out to be any more heartening. The Northeast States for Coordinated Air Use Management (NESCAUM) has petitioned and won over the support of 11 of the region’s governors, all of which signed onto an LCFS memorandum of understanding in December. A second draft of policy revisions are due by June, and with development meetings occurring nearly every month, the plan continues toward its terminus at breakneck speed.

One state, however, has recently bucked the trend. In reviewing the Clean Energy Jobs Act brought before the state legislature, Wisconsin lawmakers moved to drop the LCFS provisions originally included in the bill, citing concerns over costs, particularly to the manufacturing sector that is essential to the state’s economic livelihood. While the Midwestern Governors Association—of which Wisconsin’s governor is a member—has committed itself to developing an LCFS between the coasts, the Badger State’s example may provide the leadership this region of the country needs to understand the extreme economic hardship such legislation could bring upon its citizens.

With the threat of a dangerous LCFS scheme present in so many areas throughout the nation, Canadian officials recently traveled to Washington, D.C., to participate in a joint energy summit with the State Department. The forum, which was organized by the Center for North American Energy Security (I have the privilege to serve as its director), addressed a number of critical issues related to our continued partnership on issues related to energy, shared security and our environment. We also addressed the issue of an LCFS, which some attendees believe represents a not-so-thinly veiled attempt at denying Canadian energy resources from crossing our shared border. Reviewing the facts, it’s tough to disagree.

Ultimately, the Senate climate bill will sink or swim depending on the merit of its contents, and the votes of the many members sent to Washington to represent the interests of their constituents. That’s the way this system should work. But as we’ve seen in California, the preferred course for national implementation of an LCFS doesn’t envision a national debate, or a vote of the legislature—it depends on executive fiat, and the creation of a system so unwieldy that national regulators will have no choice but to step in.

That alone should give you some sort of hint as to its merit.