OPIS Headlines

July 23, 2015
CARB Watching LCFS Credit Price Rise

California Air Resources Board (CARB) staff is closely watching the price of carbon credits in the Low Carbon Fuel Standard (LCFS), a review of a transcript of the June 30 meeting of the Petroleum Market Advisory Committee indicates.

Committee member David Hackett, president of industry consulting firm Stillwater Associates, observed that the credit price had doubled in the few weeks prior to the meeting. "So, what's up with that?" he asked CARB's Chief of the Transportation Fuels Branch Sam Wade.

Wade said that CARB does not comment on the "underlying fundamentals" of the market and "I'm not going to get into ARB's opinion as to what the drivers of that might be." But he noted that both prices reported to the agency and spot prices reported daily by OPIS showed a rapid increase in June from the low $20s to as much as $60/metric ton.  

"The main thing that people threw out there in the write-up is the re-adoption of the program ... has become real in the minds of some of the market participants," Wade said.

Wade added that at $6/metric ton, the credit costs about 1ct/gal. At the top of CARB's proposed cost containment curve at $200/metric ton (the point at which CARB might offer relief to regulated parties), the cost would be 24cts/gal, Wade said.

Plans are well underway for the 4th Annual OPIS LCFS Workshop! Make your plans now to join us on December 10-11th at the Grand Hyatt in San Francisco. This year’s event will focus on the LCFS re-authorization and important changes it will bring – providing the critical information you need in order to stay in compliance moving forward. Visit www.opisnet.com/events/lcfs or call 888.301.2645 for more details. Reserve your seat early and save $300!


July 7, 2015
California Fuel Marketers Fail to Keep Up With Higher LCFS Credit Cost

The recent sharp price rise for California's Low Carbon Fuel Standard credits took the market by surprise, and the expected trickle-down effect leading to potentially higher wholesale gasoline and diesel prices has yet to materialize.

This could mean many rack suppliers in California are leaving a good chunk of change on the table every day as their higher LCFS credit costs may not be passed on to consumers.

California rack suppliers include Valero, Shell, Tesoro, Chevron, Flint Hills, Phillips 66, Idemitsu Apollo, Flyers, Vitol, ExxonMobil, Western Refining, PetroDiamond and Kern.

LCFS credits for gasoline jumped to as high as $0.0087/gal at the end of June before dipping down to about $0.0074cts/gal on Monday. LCFS credits for diesel rose to a high of $0.0079/gal before dropping to close to $0.0067/gal on Monday. LCFS credit values for both gasoline and diesel more more doubled the levels seen in early June.

LCFS credit cost is listed as a line item on the billing for California wholesale fuel sales under "LCFS fee," "AB32 fee," "climate change fee" and "environment fee."

All refiners and importers in California are required to cover LCFS credits for their fuel sales, and these costs are passed as a line item on the wholesale fuel sales billing. All companies who are ultimately shipping the products are on the hook for LCFS credits, which are passed on along to the buyers at the racks in order for suppliers to recoup their cost.

Despite the sharp LCFS credit jump, a majority of wholesale suppliers have kept their LCFS fees unchanged. This could mean some suppliers are leaving more than half a cent a gallon on the table.

The rack markets are very competitive in terms of pricing. A half-cent rack price difference could sway demand and margins.

A half-cent rack price difference based on a 50,000-b/d supply could add $10,000 per day to a company's margin.

Plans are well underway for the 4th Annual OPIS LCFS Workshop! Make your plans now to join us on December 10-11th at the Grand Hyatt in San Francisco. This year’s event will focus on the LCFS re-authorization and important changes it will bring – providing the critical information you need in order to stay in compliance moving forward. Visit www.opisnet.com/events/lcfs or call 888.301.2645 for more details. Reserve your seat early and save $300!


June 24, 2015
CARB Issues 2nd Comment Period for LCFS Readoption

The California Air Resources Board (CARB) has issued a second 15-day notice and comment period for public input about changes to its proposed readoption of the Low Carbon Fuel Standard (LCFS). The second notice covers changes that were not incorporated in the first notice period, and comments are due on July 8.

The CARB Board is still on track to consider the readoption at its July 23-24 hearing.

In its first announcement, CARB listed 48 substantive changes, but the second set contains only seven relatively minor changes. The most significant is that CARB is proposing to streamline the recertification of previously approved "legacy" biofuels pathways by saying it will analyze previously submitted production data in the new CA-GREET 2.0 emissions model, and will ask producers for more information only on an as-needed basis. Also, to aid producers who are seeking financing for new projects, CARB will allow the transfer or sale of credits generated under temporary and provisional pathways.

"These modifications do not change implementation of the regulation or the environmental setting in any way that affects the conclusions of the draft environmental analysis that was prepared for the proposed LCFS and ADF [alternative diesel fuel] regulations," CARB stated. "The modifications consist primarily of clarifications and limited substantive changes. Those changes relate primarily to ARB's administration of the proposed program, and will not substantially alter the compliance response to the proposed regulations."

To review the second set of changes to the LCFS, go to:   http://www.arb.ca.gov/regact/2015/lcfs2015/lcfs2nd15daynotice.pdf.

Plans are well underway for the 4th Annual OPIS LCFS Workshop! Make your plans now to join us on December 10-11th at the Grand Hyatt in San Francisco. This year’s event will focus on the LCFS re-authorization and important changes it will bring – providing the critical information you need in order to stay in compliance moving forward. Visit www.opisnet.com/events/lcfs or call 888.301.2645 for more details. Reserve your seat early and save $300!


June 17, 2015
CARB Posts Final 2014 Crude CI, Unchanged from Proposed Level

Yesterday, the California Air Resources Board (CARB) posted the final 2014 Annual Crude Average carbon intensity (CI), as required under the Low Carbon Fuel Standard (LCFS).

The final 2014 CI is unchanged from the number CARB proposed in mid-May: 11.19 gCO2e/MJ. This figure is down from the 11.37 gCO2e/Mj for the individual year 2013 and 11.35 gCO2e/MJ for 2012.

To determine the average crude CI for 2014 that is reflected in refiners' emissions under LCFS, CARB uses a weighted average of the crudes used in the state in 2012-2014. Therefore, the 2014 number is 11.30 gCO2e/MJ. CARB analyzed volumes and CI of about 300 California crudes and imported crudes.

In 2014, California refiners processed 612.33 million bbl of crude, up from 588.25 million bbl in 2013. A quick comparison of crudes imported in the last two years found that use of higher-CI Canadian crudes such as Albian Heavy Synthetic and Cold Lake was down about 40% in 2014 to 6.07 million bbl, and that use of low-CI Arab Light and Arab Extra Light from Saudi Arabia was up about 50% to 93.42 million bbl.

When it announced the proposed CI, CARB added that it was using its updated OPGEE v1.1 model for the first time. This model was introduced by CARB last year and was subject to public review and comment. CARB used OPGEE v1.1 to recalculate the CIs for 2010-2013.

For crude CI lookup tables since 2010, go to: http://www.arb.ca.gov/fuels/lcfs/crude-oil/crude-oil.htm.

Plans are well underway for the 4th Annual OPIS LCFS Workshop! Make your plans now to join us on December 10-11th at the Grand Hyatt in San Francisco. This year’s event will focus on the LCFS re-authorization and important changes it will bring – providing the critical information you need in order to stay in compliance moving forward. Visit www.opisnet.com/events/lcfs or call 888.301.2645 for more details. Reserve your seat early and save $300!


June 5, 2015
CARB Seeks Input on LCFS Changes, Sets July 23-24 for Readoption

The California Air Resources Board (CARB) has published a detailed list of changes to its proposed readoption of the Low Carbon Fuel Standard (LCFS) and announced that the CARB Board will consider the readoption at its July 23-24 hearing.

The proposed changes to the LCFS come during the same week that CARB released proposed modifications of both its CA-GREET model for calculating carbon intensity (CI) of biofuels pathways and its OPGEE model for CI of crude oil used for refining transportation fuels. In addition, they come a week after CARB released proposed Alternative Diesel Fuel regulations. (See prior OPIS news article.)

The proposed modifications of the readopted LCFS can be found at http://www.arb.ca.gov/regact/2015/lcfs2015/lcfs2015.htm, and comments will be accepted until June 19.

Along with its announcement, CARB provided a summary of the 48 substantive changes in the latest proposed version of the LCFS. One of the biggest changes is CARB's plan for prioritizing the recertification of the approximately 270 existing fuel pathways that will expire on Jan. 1, 2017.

"Specifically, staff proposes to review and approve fuel pathway applications in batches based on fuel type, so that providers of the same fuel compete on equal terms, obtaining the new carbon intensity score at the same time," CARB wrote. "The proposed prioritization of fuel types (the order in which the renewals will be completed) would be: ethanol, followed by biodiesel, renewable diesel, compressed natural gas liquefied natural gas and finally by all others."

The proposed changes also clarify that the indirect land use change (ILUC) values applied to each biofuel will be incorporated into the CI calculation in the CA-GREET 2.0 model. "In the ... proposed regulation text, the inclusion of ILUC values was referenced and understood to be part of the proposal, but the ILUC values were not explicitly included as a table in the regulation," CARB stated. "Staff now proposes to include express ILUC values for six biofuels ... and to clarify that the total carbon intensity is the sum of direct CI and (if applicable) ILUC or other indirect CI."

Other substantive changes include:

--Lower baseline CIs for California Gasoline for Oxygenate Blending, California RFG and diesel;
--Clarifications of rules for cost containment, credit retirement and credit carryovers;
--Language to fix inconsistencies in rules for product transfer documents;
--Updated definitions of terms for fuels and biofuels;
--Identification of parties that are able to generate LCFS credits for use of electricity or hydrogen in transport;
--Numerous updates and additions to the crudes identified in the crude CI tables;
--Adjustments and clarifications to the refinery investment provisions, innovative crude provisions and calculations of refinery process CIs; and
--A requirement that CARB staff prepare a progress report for the CARB Board by July 30, 2017.

Plans are well underway for the 4th Annual OPIS LCFS Workshop! Make your plans now to join us on December 10-11th at the Grand Hyatt in San Francisco. This year’s event will focus on the LCFS re-authorization and important changes it will bring – providing the critical information you need in order to stay in compliance moving forward. Visit www.opisnet.com/events/lcfs or call 888.301.2645 for more details. Reserve your seat early and save $300!