## CARB cracks down on Low Carbon Fuel Standard violators; $785K in penalties for three companies ##### 26 April 2018 Three energy companies have agreed to fines totaling$785,000 following investigations by the California Air Resources Board (CARB). All three companies violated provisions of the Low Carbon Fuel Standard (LCFS).

• SK Energy Americas agreed to a $395,000 penalty for failure to meet the carbon intensity target for 2014. • Alon USA and subsidiary, Paramount Petroleum have agreed to pay a$300,000 civil judgment for failure to accurately report fuel transactions.

• Kern Oil & Refining agreed to a penalty of $90,000 and forfeiture of 15,838 LCFS credits for misreporting the type of low carbon fuel it sold (These credits are currently worth nearly two million dollars.) CARB first approved the LCFS in 2010 with compliance starting in 2011. The LCFS requires that companies producing fuel for use in California lower the carbon in their production process 10% by 2020. The regulation requires that fuel suppliers meet, on an annual basis, a clean fuel target for the vehicle fuels they sell in California. If an individual fuel they supply is below that annual target its carbon emissions are lower and it generates marketable credits for the producer; fuels above that number generate deficits. If producers are unable to supply enough low-carbon fuels in a year to meet the annual target, they must acquire credits from other fuel suppliers in the marketplace to make up the deficit. SK Energy Americas agreed to pay the$395,000 penalty because it failed to cover its deficit in 2014.

All producers are required to accurately report the types of fuel produced for sale in California and transactions for sale of that fuel. CARB took Alon and Paramount to court for their failure to accurately report its sales. Kern Oil was fined for inaccurate reporting of fuel type, and in addition to the fine CARB invalidated the credits associated with the misreported batches of fuel.

The LCFS is a tool critical to achieving California’s 2020 GHG emission reduction goal of a return to 1990 levels. It will also be important in reaching the legislatively mandated 2030 reduction goal of 40% below 1990 levels and 2050 target of reductions 40% below 2030 levels.

CARB is planning to amend the LCFS starting in 2021 to require a 20% reduction in fuel carbon intensity (CI) from a 2010 baseline by 2030.

The amendments also propose smoothing the near-term benchmark schedule by linearly reducing by 1.25% annually from a 5% reduction in 2018 to the 20% value in 2030.

CARB staff is also proposing amendments that broaden the list of fuels subject to the LCFS regulation and alter the opt-in and/or exempt status of particular fuels. Major potential changes include:

• Addition of alternative jet fuels (AJF) as opt-in credit-generating fuels. CARB suggests that including AJFs would yield two main benefits. The first is signaling California’s “interest” in addressing a growing source of GHG emissions. The second is that because AJF and renewable diesel 9RD) are often produced in the same facility using the same feedstock, inclusion of AJF may lead to increased investment in facilities, thereby increasing the production of both fuel types.

• Removing the opt-in status of fossil compressed natural gas (CNG, hydrogen, and the exemption for propane. The current regulation designates hydrogen and CNG from fossil natural gas as opt-in fuels because they are presumed to have a CI that meets the benchmarks every year. Under the more ambitious CI benchmarks, however, staff anticipates some pathways for these fuels will have a CI that exceeds the benchmarks. Staff is also proposing including propane in the regulation.

• Allowing military fuels used in military vehicles to opt in. The LCFS currently exempts all fuels supplied for use in military tactical vehicles and support equipment from both credit and deficit generation. Producers have pointed out that this reduces their incentives to sell low carbon fuels to the military.

Staff is also proposing amendments that add flexibility for accounting for renewable/low-CI electricity used in zero emission vehicle (ZEV) applications, such as electric vehicle charging and hydrogen production via electrolysis.

Staff is also proposing an option to recognize and reward the GHG benefits of shifting EV charging and electrolytic hydrogen load to the periods of time when intermitten renewable electricity might otherwise be curtailed.

CARB is holding a public hearing on 27 April in Sacramento to consider the amendments to the LCFS and to the Regulation on Commercialization of Alternative Diesel Fuels.