Opposition to increasing gas & diesel fuel restrictions

By John Ledger
Associated Oregon Industries

AOI has submitted comment to the Environmental Quality Commission (EQC) regarding a proposed rulemaking that would impose sweeping California gasoline and diesel fuel restrictions in Oregon.

The proposed rules force increasingly stringent requirements for fuel make up and fuel sources beginning in 2014 and running through 2025. Each year the average carbon intensity of the fuels (diesel and gasoline and their admixtures) would be forced lower as a greenhouse gas reduction measure.

The rule could have an impact on fuel availability and cost for Oregon residents, businesses, and especially trucking.

To see detail of the rule go here.

To see AOI comments and reasons for opposing this rule go here.

To read a more detailed explanation of the proposal, go to the August 30 edition of the Leading Issues.

Under this new program, ethanol use would be increased dramatically and the allowable sources of ethanol would move from U.S. Midwest corn to South American sugarcane, then to cellulosicly produced ethanol (not commercially available yet), and ultimately, the purchases of credits. It is essentially a cap and trade system on gasoline and diesel fuel.

There are no refineries in Oregon and we get little gasoline from California, so it would require special blending and handling by out of state refineries.

The cost impact of the rule is unclear, but worrisome. Proponents of the restrictions claim that there would be no price impact. A study provided by the petroleum industry estimates cost increases from 22 cents a gallon to doubling. The rule includes a complicated relief valve mechanism to suspend program, but that would not be trigged unless the program forced up costs by at least 5%, about 20 cents a gallon at today’s prices. The relief valve mechanism is based in a rolling 12-month moving average and involves extensive analysis and processes – it would take about one to two years to effect.

The Commission has a self-imposed deadline of the end of this year to act on the proposal. Interestingly, the 2009 legislation that granted authority to the Commission to adopt these rules contains a sunset clause that, unless removed by another bill, kyboshes the program after 2015.

AOI will be active on the issue in both the rulemaking and legislative phases.

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