What do the Crater Lake Trolley, a Eugene truck fueling station, and the Rogue Valley Transportation District have in common?
This disparate band of small businesses and a local district are providers of a clean transportation fuel called compressed natural gas (CNG). Since the beginning of this year, these entities have found new value for their CNG product under the Clean Fuels Program, Oregon’s landmark regulation to reduce greenhouse gas emissions from the transportation sector.
The regulation, which came into effect on January 1 2016, requires providers of gasoline, diesel, ethanol and biodiesel to reduce the carbon intensity of fuels they supply to the state 10% by 2025.
Under the program, providers of clean fuels, such as businesses that own electric vehicle charging stations, compressors for natural gas, or dispensers for propane will be given credits, which they can sell to obligated companies.
The regulation could be a financial windfall for businesses that provide low-carbon fuels, and help boost a sector that often struggles to turn a profit.
Waste Management is one company that expects to generate credits under the Clean Fuels Program by the end of this year. The Houston-based waste disposal and recycling company plans to generate credits from biogas, a low-carbon fuel derived from landfills.
Money it receives from selling credits could spur the company to expand its CNG infrastructure, said Kim Kaminski, senior government affairs manager for the Pacific NW/British Columbia.
“We have the largest solid waste management CNG fleet in the Pacific Northwest and could expect to further expand it based on the credits we generate,” she said.
Officials at the Oregon Department of Environmental Quality (DEQ), which administers the Clean Fuels Program, are reaching out to clean fuels providers in the state to boost local participation. Many of the companies that are currently registered as credit generators are large businesses that are headquartered outside of Oregon.
The DEQ’s Clean Fuels Program manager Cory-Ann Wind said the agency is doing more work to reach out to local school districts, for example, which can generate credits from providing propane, a clean alternative fuel, to run school buses.
Doing outreach is a big task for the clean fuels team, which consists of just two people. “We know (propane) infrastructure is out there. We don’t know exactly where it is or who owns it,” said Wind.
TriMet is one prominent transit organization that may receive credits for running electric buses. In July the Portland metro transit agency announced plans to buy four electric buses using federal grant money.
“We’re looking forward to testing these vehicles to see how they perform, and if it makes sense to add more of these electric buses to our fleet,” said Neil McFarlane, TriMet general manager in a July announcement.
Electric vehicle charging companies can generate credits under the Clean Fuels Program because electricity they provide to run vehicles is considered a low-carbon fuel. TriMet would generate credits if it owned the electric vehicle charging infrastructure. It is unclear if it will use an electric utility, such as Portland General Electric, to provide the electricity instead.
Some clean fuel providers are skeptical of the significance the Clean Fuels Program on their overall business. John Anderson, president of Eugene Truck Haven, said the credits it will generate from its CNG fuelling station will not have much sway over the company’s direction.
Anderson estimates it has so far generated 12 to 14 credits from providing CNG from its recently opened filling station. Its customers are primarily entities that are transporting municipal service vehicles, such as buses and garbage trucks, to nearby cities.
Anderson estimates the credits may be worth $50 to $100 each, based on prices for credits in a similar program in California.
“Those credits are fun little trinkets. Baubles you would have in your jewelry case. It will not move the needle where it makes or breaks our company,” said Anderson.
Credits have not yet traded under Oregon’s program. This is because compliance requirements are low in the beginning. Regulated parties initially do not have meet targets until the end of 2017. DEQ data show companies actually over-complied in the first two quarters of this year, making it inessential for them to buy credits.
But credit generators will be able to monetize more credits as demand increases in the latter stages of the program when the carbon reduction targets intensify. California’s equivalent program, the Low Carbon Fuel Standard, has been in force since the start of 2011. Eight million credits have so far traded. The current average price for a credit is $88.
It is possible Oregon’s clean fuels program will link with California’s in the future.
A big disadvantage Oregon has over California is that its southern neighbor has funding from its cap-and-trade program to boost demand for alternative fuels. Some of the revenues from California’s cap-and-trade program subsidize electric cars, for example. Oregon has no complementary carbon reduction programs to rely on.
Anderson complained that no government body in the Eugene-Springfield area uses a natural gas vehicle that could use his CNG facility. This is far more important to his business than clean fuel credits, he said. “I think the Clean Fuels Program will not achieve what it trying to achieve without ancillary participation from public entities,” he said.
Oregon’s Clean Fuels Program has the potential to revitalize the alternative transportation sector and even provide well-needed funds for schools and local districts. But a complementary carbon reduction program, such as cap-and-trade or a carbon tax, would lend necessary support to keeping the program relevant.