Comment Log Display

February 20, 2024

Rajinder Sahota
Deputy Executive Officer
California Air Resources Board
1001 I Street
Sacramento, CA 95814

Re: Low Carbon Fuel Standard Updates

Dear Deputy Executive Officer Sahota,

On behalf of the Bay Area Council and our partners, we respectfully
request the California Air Resources Board (CARB) consider specific
actions in the Low Carbon Fuel Standard (LCFS) update to advance
the production of Sustainable Aviation Fuels (SAF) in furtherance
of California's 2045 climate goals. Specifically, we ask that CARB
cap carbon intensity ratings for new Sustainable Aviation Fuel
(SAF) production facilities; provide equal access expansion of book
and claim accounting to SAF; leverage LCFS provisions to realize
additional SAF air quality benefits beyond GhG emissions; and that
CARB reconsider its proposal to regulate fossil jet fuel for
intrastate flights.

The CARB 2022 Scoping Plan establishes the goal of using SAF to
meet 80 percent of all aviation fuel demand by 2045, up from less
than one percent today. Meeting this ambitious goal will require
unprecedented investments in new infrastructure and the processing
of many thousands of tons of feedstock. SAF refineries are large
infrastructure projects requiring substantial financing, and the
inclusion of CARB's renewable fuel refinery CI performance
thresholds in commercial contracts is an increasingly important
tool for making these projects pencil. Models used for the
generation of price support mechanisms such as the Low Carbon Fuel
Standard (LCFS) credit and the Blenders Tax Credit (BTC) rely on CI
as a key metric for credit valuation and generation. However, under
current rules, CARB may change the official CI for SAF projects at
any time, undermining the value of the BTC and the LCFS credit that
underpins project feasibility. This uncertainty acts as a
disincentive to investors and is an obstacle to achieving the
state's SAF production goals and broader emissions targets.

To address this challenge, CARB should consider opening a 10-year
window during which time SAF refinery projects would be allowed to
keep, for a period of 20 years, the CI determination made by CARB
using the GREET methodology at the time of the project's Final
Investment Decision (FID). To ensure the baseline CI determined at
FID is continuously met, producers should agree to re-testing on a
regular bi-annual cadence. By better aligning CI incentives with
asset lifespans, CARB would provide the predictability necessary
for securing the large-scale financing needed to jump-start this
important new industry.

We commend CARB's current policy supporting book and claim
accounting for low-CI electricity and RNG inputs for low-CI
hydrogen production, as well as their initiative to expand access
through power purchase agreements (PPAs). Nevertheless, we advocate
for equal access expansion to Sustainable Aviation Fuel (SAF). Both
low-CI hydrogen and SAF play pivotal roles in displacing
hard-to-electrify

sectors like aviation, as outlined in the 2022 CARB Scoping Plan.
However, existing LCFS rules tend to disadvantage SAF in comparison
to hydrogen due to limited access to emissions reductions from
process energy, such as low-CI electricity and RNG. This
incongruity undermines state objectives for SAF uptake and aviation
decarbonization, necessitating CARB's intervention to ensure
equitable treatment between these future fuels.

Furthermore, we underscore the critical importance of encouraging
the long-term adoption of SAF by leveraging LCFS provisions to
realize additional air quality and climate benefits. Notably, while
light and medium/heavy-duty transportation are expected to
electrify within decades, aviation's transition to decarbonization
will be more prolonged, with SAF anticipated as the primary lever.
CARB must recognize and account for the substantial positive
externalities associated with SAF substitution for fossil jet fuel
and devise mechanisms within the LCFS to drive SAF adoption.
Additionally, considerations such as the air quality benefits of
SAF, particularly in reducing fine particulate matter, must be
addressed. Equally significant are the environmental justice
concerns raised by communities living near airports, urging CARB's
support for SAF as a means to mitigate the disproportionate health
impacts of fossil jet fuel combustion. It is only through actual
SAF adoption that these air quality benefits might be realized.
Given these multifaceted benefits unique to SAF, we urge CARB to
prioritize its utilization and explore innovative measures, such as
credit multipliers or CO2 equivalent metrics, to appropriately
incentivize its adoption and address its distinctive contributions
to climate mitigation.

In addition, The Bay Area Council also expresses serious concern
with a new proposal by the California Air Resources Board (CARB) to
regulate "fossil jet fuel used for intrastate flights" as an
obligated fuel under the LCFS Program. We do not believe this
proposed change would result in increased SAF production,
availability, or use in California, but it would lead to higher jet
fuel prices. The primary barrier to increased SAF production and
availability in California remains the higher cost of SAF for
producers and buyers relative to conventional jet fuel and
renewable diesel. The CARB proposal would not address this
fundamental challenge or otherwise meaningfully increase SAF supply
or use. Instead, the Bay Area Council suggests CARB consider
alternative incentive structures that can help close the price gap
between SAF and Conventional Jet-A, alongside SAF-specific economic
development programs and investments via GoBiz as previously
encouraged by SB1383 and the SAF Coalition.

Additionally, the intra-state flight proposal seeks to regulate jet
fuel and reduce emissions from aviation, both of which are
pre-empted under federal law - a fact that CARB recognized when it
exempted jet fuel in 2018. Aviation has unique demands for
reliability and consistency with approved fuel specifications for
the safe operation and maintenance of aircraft. Accordingly, while
the EPA is the primary federal regulator for on-highway, non-road,
and marine fuels, under 42 U.S.C. § 7545, the FAA has
authority to establish standards for composition and chemical or
physical properties of jet fuel or to eliminate aircraft emissions
(49 U.S.C. § 44714). The FAA retains federal jurisdiction over such
fuels even if used for intrastate flights. These statutory
authorities establish clear and broad federal authority for
regulating jet fuel and aircraft engine emissions that pre-empts
California from regulating fossil jet fuel under the LCFS program.
We ask that CARB reconsider this aspect of the proposed regulation
and maintain the exemption for jet fuel from regulation under the
LCFS program.

The Bay Area Council represents 350 of the Bay Area's largest
employers across all sectors of the economy. For many of these
companies, air travel represents the vast majority of Scope 3
emissions. Unlike other sectors, aviation has no realistic net-zero
alternative over the next 20 years, making state efforts to scale
SAF all the more important. By better aligning current incentives
with asset life cycles, California can become a world leader in SAF
production and come that much closer to achieving its broader
climate goals. We stand ready to offer any assistance necessary to
transform these goals into a tangible reality.

Thank you for your leadership, and for considering our views.

Sincerely,

Adrian Covert
Senior Vice President, Public Policy
Bay Area Council

Adam Klauber
VP Sustainability and Digital Supply Chain
World Energy

Jared Asch
Managing Partner
Capstone Government Affairs