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About the RFS Code Update

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On Dec. 7, 2022, City Council unanimously adopted amendments to the Renewable Fuel Standard, Portland City Code Chapter 16.60, which reduces dependence on nonrenewable fossil fuels, by increasing the required percentage of renewable fuels blended with petroleum diesel sold in the city of Portland.
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Project purpose and implementation 

Burning diesel fuel in vehicles and off-road equipment is Portland’s fourth largest source of carbon emissions: about 14% of total local emissions. The largest consumers of diesel fuel are businesses that use construction equipment, run large fleets, or have freight operations. However, today there are viable renewable fuel alternatives that are cost effective and available in Oregon. This project will displace dirtier diesel fuels with cleaner, renewable options.

This update is critical to meeting the City of Portland’s climate and renewable energy goals and is included in the City’s 2022-2025 Climate Emergency Workplan, which lists the City’s priority actions over the next three years. In addition to these reductions, this policy provides immediate air quality improvements by reducing diesel particulate matter, which is a harmful pollutant directly impacting the health of Portlanders.

Biofuels are any fuel derived from plant or animal matter rather than fossil-fuel based sources, such as decomposed plants and animals found under the Earth’s crust. “Biofuels” and “renewable fuels” are used interchangeably. The three primary biofuels are:

  1. Biodiesel
  2. Renewable diesel
  3. Ethanol

Updating Portland’s Renewable Fuels Standard is a straightforward and efficient way to replace dirtier diesel fuels with cleaner, renewable options; improve human health by removing a substantial amount of diesel particulate; and advance a local, circular, inclusive economy that is more independent from the global fossil fuel industry.

At full implementation, the proposal would replace 99% of petroleum diesel sold in the city with renewable fuels, including renewable diesel and biodiesel by 2026 (see Table 1 below).

The City will ensure the renewable fuels used in Portland are lower carbon across their entire lifecycle by adding a carbon-intensity standard, which is aligned with the Oregon Department of Environmental Quality (DEQ) Clean Fuels Program. The proposed carbon-intensity standard will exclude most biofuels made directly from agricultural products, instead favoring reused and recycled products that have lower lifecycle carbon emissions.

This code amendment will immediately help to reduce local carbon emissions by directing all retailers of petroleum diesel fuel to increase the percent of renewable fuels that are blended with all petroleum diesel products sold in Portland. Due to the phased-in approach, the City does not anticipate an increase in prices at the pump.

Thanks to credits generated through the State Clean Fuels Program, renewable fuels, like biodiesel, are already more affordable than petroleum diesel fuel. The phase-in schedule allows increased supply to meet demand over the next four years. In the event of technical or economic circumstances that could impact supply or price, City code grants Bureau of Planning and Sustainability (BPS) interim rule authority to temporarily amend the code and adjust renewable fuel blends.

While the future of vehicle transportation is electric, this code amendment does not address vehicle electrification. The majority of heavy-duty vehicles that this policy addresses do not have viable electric alternatives available on the market. Increasing the blends of renewable fuels used today can achieve some near-term carbon emission reductions. Furthermore, requiring renewable fuels, especially those produced in Oregon, helps to keep dollars in our local community and support local businesses. This update also helps reduce diesel particulate matter pollution that disproportionately effects communities of color and low-income populations along highways, arterials, and freight corridors.

Staff are currently drafting administrative rules. A technical advisory committee will be formed to assist with this process.

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Amendments

Major amendments include:

Amendment 1. Accelerate the increase in percentage of renewable fuels by volume.

By 2026, the proposal would replace 99% of petroleum diesel sold in the city with renewable diesel or biodiesel.

Supported by BPS’s research and industry stakeholder engagement, the proposal takes a fuel-neutral approach to increasing the percentage of renewable fuels on a quick timeline. “Fuel neutral” means that, as long as retailers can meet the standard, the City remains agnostic as to the specific blend percentages of biodiesel versus renewable diesel. Table 1 shows the proposed schedule for phasing in renewable fuels.

Currently, the minimum volume of renewable fuel required is 5% biodiesel. The first proposed change occurs in 2024, when the renewable fuel requirement increases to 15%. It then increases annually, so that by 2030 all diesel fuel sold in the city of Portland would be 99% renewable. Due to Federal blending credits, that incent blending biofuels with fossil fuels, one percent of petroleum diesel will remain in the fuel blend after 2030.

Table 1. Proposed phase-in of blending requirements (percent by volume), 2023-2026
Fuel TypeCurrent202420262030
% Petroleum diesel9585501
% Renewable fuels5155099
% Total100100100100

The proposed changes apply to the sale of diesel fuel only. The standard does not apply to the use of diesel fuel in the city. It also does not apply to gasoline (the existing 10% ethanol requirement will remain unchanged).

Amendment 2. Add a carbon-intensity standard

To align with the DEQ Clean Fuels Program, City Council added a carbon-intensity standard. Renewable fuels used to meet the standard will need to have a lifecycle carbon intensity of 40 grams of carbon dioxide equivalent per megajoule (gCO2e/MJ). A carbon-intensity standard ensures that renewable fuels in Portland are truly lower carbon across their entire lifecycle (from production to utilization).

View the full amendments

Cost analyses

The bureau acknowledges concerns about inflation and fuel prices, and we anticipate concerns about increased diesel prices at the pump that could affect people who can least afford it. Below is the best available data on which staff based the code amendment proposal.

Biodiesel cheaper than petroleum diesel

Biodiesel data are only available at the national level. Figure 1 shows that biodiesel has been less expensive than petroleum diesel since 2017. In Oregon, biodiesel per gallon is even less expensive, due to the Oregon Clean Fuels Program credits. Privately disclosed local data confirms these national statistics.

Some retailers in Portland, like Safeway, currently blend up to 20% biodiesel with diesel fuel to reduce the per gallon cost at the pump. According to biodiesel producers and suppliers, there is ample supply of biodiesel to require 15% renewable fuel in 2023 and beyond, without negative cost impacts.

Line graph showing the cost of B20 slighly lower than diesel since Oct 2017
Figure 1. Average Retails Fuel Prices in the United States 2010–2022. Source: afdc.energy.gov/data

Renewable diesel cost analysis

Today, renewable diesel is a relatively limited product that only large purchasers like City of Portland and TriMet can access through negotiated contracts. This means that prices are not publicly available. Prices through negotiated contracts vary depending on contracted volume and supplier but tend to track close to the cost of petroleum diesel.

For example, the City of Portland has used blends of renewable diesel from 75-99% since 2015. CityFleet has a negotiated contract for renewable diesel, which generally has had a lower price per gallon than petroleum diesel. Figure 2 shows the cost advantage of renewable diesel.

Line graph showing cost of renewable diesel less than petroleum diesel most of the time since Jan 2017
Figure 2. CityFleet fuel costs per gallon. Source: Portland CityFleet.

The data reported for renewable diesel is the standard diesel fuel product purchased through the City’s fuel contract and delivered to the City of Portland fleets. The City has been able to obtain renewable diesel 75-99% of the time. Sometimes this product is unavailable and thus the data includes a small share of petroleum diesel fuel. The data for external diesel fueling means diesel fuel purchased outside of the City's fuel contract from retail fueling stations. In most cases external diesel fueling is B5.

The intent of the Renewable Fuel Standard (RFS) update is to bring renewable fuels to retail fuel stations, providing more transparency of costs and increasing use. The RFS will create certainty for demand for renewable diesel to help direct more supply and stabilize prices, similar to biodiesel since the first RFS was adopted in 2006.

The uncertainty of fuel supply and price are why BPS proposes to phase in higher renewable fuel blends in the later years. Costs will remain speculative, so BPS intends to convene an advisory group of producers and suppliers to monitor supply and price throughout the phase-in schedule. And, as noted above, the code will continue to allow for immediate course correction, through interim rule authority, should supply of renewable diesel fail to materialize by 2025-2026.

Project background 

In 2005, the City of Portland adopted Chapter 16.60, Motor Vehicle Fuels Code Amendment to regulate minimum blends of renewable fuels in petroleum-based fuels sold in Portland, with the intent to reduce dependence on nonrenewable fossil fuels. In 2020, City Council directed BPS staff to recommend amendments to the code to meet the City’s 100% renewable energy resolution.

Since then, the bureau has been developing this proposal. This work required monitoring and tracking statewide legislative efforts, extensive fuels research, and stakeholder engagement. BPS hired a consultant to lead the research project over the last few years, including interviews with industry representatives.

In June 2020, Portland City Council adopted the Climate Emergency Declaration, acknowledging that the Portland metro area faces a human-made climate emergency and that frontline communities are the least responsible for – but most impacted by – climate change. The Declaration amended the City’s targets for carbon emissions to at least a 50% reduction by 2030 and net-zero carbon emissions before 2050. Consequently, Portland City Council directed BPS to recommend code amendments to the City’s Renewable Fuel Standard (Portland City Code 16.60) to help meet these critical climate goals.

BPS commissioned a consultant to conduct extensive fuel research, interviews, and stakeholder engagement to guide policy development. We listened to suppliers, producers, and other key actors in the renewable fuels industry to develop an aggressive but feasible phase-in schedule. In September 2021, BPS tested the phase-in schedule with local suppliers and producers in a workshop that included small local companies and global fossil fuel suppliers like BP. We heard consensus that achieving 99% renewable by 2027 is feasible. Advocates for statewide policy to replace petroleum diesel have promoted a similar timeline. In addition to research, staff convened a variety of industry and community stakeholders for workshops, or educational sessions in 2021 and early 2022.

Staff considered all recommendations provided during the public comment period, made changes and a final policy amendment passed at City Council on December 7, 2022.

Project steps and timeline 

Aug. 29, 2022 — Draft policy available for public comment 

Sept. 15 and Sept. 22, 2022 — RFS public meetings 

Oct. 3, 2022 — Public comment period ends

Nov. 11, 2022 — Ordinance released for written testimony and City Council agenda posted

Nov. 16, 2022 — Public hearing at Portland City Council

Nov. 18, 2022 — Deadline for written testimony

Dec. 7, 2022 – City Council adopts proposed amendments

Jan. 2023 – Administrative rule writing

Additional information