Comment Log Display

February 18, 2024
The Honorable Liane Randolph
Chair, California Air Resources Board
1001 I Street
Sacramento, CA 95814

	Re: Proposed Amendments to the Low Carbon Fuel Standard 

Dear Chair Randolph:

As you may recall from your visit to our facilities several years
ago, Calgren has been producing low carbon intensity renewable
fuels in Pixley, California since 2008, shortly before the LCFS
start date of January 1, 2010. While others in the renewable fuels
industry have occasionally questioned the wisdom of California's
LCFS, both in the courts and otherwise, we have been among your
strongest and most consistent supporters from the very start. In
addition, we remain especially proud of the fact that we have been
able to bring well-paid jobs and economic activity to an
impoverished area of our great state. 

With that background, we offer the following constructive comments
to the 45-day language to amend the LCFS:

1.	We are disappointed that the proposed changes fail to level the
playing field for in-state producers of biomethane. 

In 2022 and 2023, CARB staff recommended that Book and Claim
accounting for biomethane that is undeliverable to California be
phased out. The changes now proposed have abandoned that approach
and treat all out-of-state projects, even those that cannot
possibly deliver into California, the same as we California
producers. 

To give but one example of the uneven playing field, California
biomethane producers face ever increasing standards for injection
into California's pipeline system; California's biomethane
injection standards are far more stringent than biomethane
producers face in any other state. Yet biomethane producers in
those more lenient states may use the same Book and Claim
accounting without having to meet the same injection standards. In
earlier comments to CARB, we suggested that out-of-state producers
be required to meet California's injection standards to use Book
and Claim, a concept we continue to support. California gets the
vast majority of its pipeline natural gas from out-of-state, yet
there is no mandatory testing of that gas as it enters our state.
Hence a biomethane producer is actually (and no doubt
inadvertently) encouraged to locate outside California's borders.
That is at odds with the Independent Statement of Reasons (ISOR)
provided in support of the proposed regulatory changes. 

As noted above, CARB staff took a slightly different tack in
recommending a sensible restriction - that Book and Claim for
out-of-state biomethane producers injecting into pipelines that do
not serve California be phased out. The proposed changes to the
LCFS have abandoned this sensible approach in favor of applying the
same restrictions to in-state producers as are applied to
out-of-state producers. Frankly, we think both requirements should
apply, i.e. that out-of-state biomethane producers that wish to use
Book and Claim accounting both meet California's biomethane quality
standards and demonstrate deliverability into California.

In addition to cleaning up California's environment and encouraging
in-state commercial activity, another of CARB's laudable goals is
to encourage enactment of LCFS-type regulations in other states
(ex., page 15 of the ISOR). Those goals are actually (and, again,
no doubt inadvertently) thwarted by CARB's willingness to award
California carbon credits for renewable fuel that is already in use
in those other target states. 

In fact, we now take this argument one step farther. Ultimately,
LCFS costs get passed on to California residents via higher vehicle
fuel costs. We applaud that willingness to pay what it takes to
help clean up the air we breathe. But awarding LCFS credits for
biomethane that cannot be delivered into California forces
Californians to pick up the tab to help clean the air in other
geographic regions. That's inappropriate. 

It is a fact that new biomethane projects can achieve pipeline
injection much quicker if they are out-of-state. While we don't
agree with the logic, we have heard that one reason to initially
award LCFS credits for out-of-state biomethane projects that cannot
deliver into California was to encourage the growth of in-state
biomethane production. If so, that goal has been achieved;
California biomethane producers are now capable of meeting
California's current, commercially attractive biomethane demand.

Continuing to offer LCFS credits for undeliverable biomethane is
both unwarranted and detrimental to California biomethane
producers.

2.	The proposed carbon intensity benchmarks should be stricter
sooner, perhaps even this year.

LCFS credits have recently been trading below $60 per MT. As CARB
has heard from all quarters, that is too low. In fact, the recent
announcement that CARB would delay adoption of the LCFS changes to
"re-evaluat[e] the carbon intensity benchmarks" caused the spot
price of carbon credits to jump almost 10%. That is a clear sign
that the proposed step-downs need to be more aggressive.

We have consistently endorsed both a stronger step-down and the
adoption of an Automatic Acceleration Mechanism (AAM). We hereby
urge that the AAM triggers be moved up. As proposed, the mechanism
cannot be triggered earlier than 5/15/2027. That is too late.

3.	Section 95482(g) prohibits dairy projects breaking ground after
12/31/2029 from generating credits by supplying CNG vehicles after
12/31/2040. 

It is difficult to see how this proposed change squares with the
goal stated on page 4 of the ISOR of promoting investment in
disadvantaged, low-income and rural communities. In California,
those are the areas that have benefited from dairy digesters.
Terminating credit generation for CNG vehicles before attractive
alternatives are available is likely to halt all dairy digester
projects that would otherwise break ground after 12/31/2029. For
that reason, it is also likely to thwart the separate goal of
supporting methane emissions reductions, also appearing on page 4
of the ISOR. In addition, using the LCFS in this manner to pick
winners and losers is likely to make it more difficult for other
jurisdictions to adopt LCFS-type programs, a goal that is stated on
page 15 of the ISOR. We fervently believe that the capture of
methane from dairies should be supported, for the overwhelmingly
valid reasons stated beginning on page 29 of the ISOR and in
SB1382, not thwarted as in this proposed change.

4.	Section 95486.1(g) assesses a penalty of four times the actual
credit shortfall should a valid pathway holder receive a verified
pathway higher than its certified pathway.

The change proposed in Section 95486.1(g) is at odds with the
accurate statement in Section 95488.4 that CIs will inherently vary
and should not be penalized for such natural variance. It also
potentially treats pathway holders worse than petroleum refiners,
who have from January 1st through April 30th of each year to
acquire Carryback Credits to satisfy prior year credit deficiencies
under Section 95486(a)(5). As written, the corrective procedure of
Section 95486(a)(5) is available to obligated parties, but it is
not clear that it is available to pathway holders. On page 29 of
Appendix E, Purpose and Rationale for Low Carbon Fuel Standard
Amendments, the rational for the change to Section 95486.1(g)
includes the statement that mechanisms exist to retroactively
provide credits to fuel pathway holders when the verified
operational CI is lower than the certified CI, but Section
95486(a)(5) is not mentioned. Pathway holders should either not be
subject to the proposed penalty or should have a similar
opportunity to acquire Carryback Credits.

The success of the LCFS is due in no small part to the enthusiastic
support of California producers such as Calgren. We believe in
CARB's goals and intend to continue to be among your most ardent
supporters. If the comments above are adopted, we sincerely believe
those shared goals will be greatly advanced.

Thanks again for all your far-sightedness.

Very truly yours,

Travis Lane, CEO