In 2022, City of Portland adopted a new Renewable Fuel Standard (RFS), which increases the amount of low-carbon biofuel blends over the next several years. The policy will shift Portland’s diesel fuel mix to 99% renewable by 2030. Portland’s policy is unique because it includes a Carbon Intensity (CI) Standard to shift to fuels that are lower carbon across their entire lifecycle.
The Portland Bureau of Planning and Sustainability (BPS) is currently working on administrative rules for program implementation. Given that the RFS was initially adopted in 2007, the existing administrative rules will be amended through this process.
Stakeholder engagement
Interviews were conducted with a variety of stakeholders, including government agencies, fuel importers, fuel distributors, and fuel retailers to inform the rulemaking process. On June 15, 2023, BPS held a public meeting to gain additional input on the proposed framework.
Proposed amendments
In discussion with DEQ and ODA, the City determined that several areas addressed by the 2007 RFS rules are covered by other State or Federal agencies. As a result, the updated RFS rules could eliminate these sections entirely or simplify them by referencing the relevant State or Federal rules. The only rules that needed to be written related to the updated policy’s CI standard. The City determined actions for each section of the 2007 RFS rules.
| Section | Proposed action | Explanation |
|---|---|---|
Authority, Purpose and Scope, Definitions, and Requirements | Revise | These sections will be updated to reflect code updates and add any new definitions as needed. |
CI Standard and Compliance Options | Add | Draft new section with input from stakeholders |
Specification Standards | Delete | Covered by ORS 646.905-990 |
Certification and Blending | Delete | Covered by ORS 646.905-990 |
Testing and inspections | Revise if needed | Generally, no changes anticipated, except minor revisions to align with state practices |
Record Keeping and Reporting | Revise if needed | Update if needed depending on CI Standard Compliance method |
Labeling | Delete | Covered by Federal Trade Commission Fuel Rating Rule |
Enforcement | Revise | Minor changes to reflect code updates |
Because the CI Standard was the only substantial new policy area in the updated RFS, the City asked E4E to focus its industry stakeholder interviews on the potential approaches for implementing this policy direction. The conversations with fuel industry stakeholders identified specific implementation recommendations, which are discussed in the E4E memo here:
Definitions of carbon intensity
Stakeholder input revealed that there are two ways the City could define carbon intensity: absolute or average. BPS’s proposal is to allow regulated parties to use the average CI approach. Nothing precludes a business from bringing in fuel with an absolute CI value of 40 or lower. But the City does not propose to mandate this.
How the City will evaluate the CI value of renewable fuels is separate from the determination of compliance pathways. The chosen definition will apply to both compliance pathways discussed below.
Absolute or Average CI
The “absolute CI” would require that all qualifying renewable fuel has a Clean Fuels Program fuel pathway code associated with a CI value of 40 gCO2e/MJ or less. Fuel with above-40 CI could not be used to meet the City’s requirements under this definition.
In contrast, the “average CI” approach would allow above-40 CI fuel to be used to meet the requirements, provided a sufficient volume of below-40 CI fuel was also used such that their weighted average yields a CI value of 40 gCO2e/MJ or less over the course of a calendar year.
Feedback from stakeholders was mixed as to which CI definition would work for their business practice and supply chain. Some felt the 40 CI maximum was reasonable and believed they would not have a problem supplying cost-competitive renewable fuels at or below the 40 CI maximum. Others preferred the flexibility inherent in the average CI approach because it would allow them to adapt to supply and price fluctuations.
While allowing the average CI approach may seem like a less stringent approach, it reflects the real-world challenges associated with fuel distribution. The option to allow CI averaging, also reduces the need for fuel suppliers to add more storage capacity because they can continue to store fuels with different CIs in the same storage tank. BPS recommends this policy design because any additional fuel storage – even renewable fuels - presents more environmental risk in the case of a spill or major earthquake.
Proposed CI compliance pathways
BPS is proposing two different compliance pathways based on different business practices and supply chains of the various regulated parties, i.e., differences between vertically integrated fuel companies like Chevron or Shell compared to a smaller local gas stations and fuel suppliers that have more diverse and varied supply chains.
Compliance Pathway 1: Book and Claim
What is it?
The term “book and claim” is an accounting approach that decouples the environmental attributes from the physical product, thus allowing the environmental attributes to be transferred separately from the product itself. Perhaps the most well-known use of book and claim account is in the form of Renewable Energy Credits (RECs) for electricity.
How will it work?
The City proposes the use of a book and claim reporting approach to ensure that a sufficient volume of low-CI renewable fuel is imported to Oregon to satisfy Portland’s diesel consumption, regardless of whether that low-CI fuel is sold in Portland.
What reporting is required?
The book and claim approach requires a fuel retailer to have a fuel importer who volunteers to report on their behalf. The reporting requirements are generally consistent with what fuel importers already report to Oregon Clean Fuels Program and on the same reporting schedule.
The benefits of this compliance pathways include:
Relatively simple reporting. The required reporting leverages data (imported fuel volumes by fuel pathway) that importers are already tabulating and reporting to the Oregon Clean Fuels Program.
No burden on distributors and retailers. Because reporting is performed by fuel importers, there are no reporting requirements on distributors and retailers.
Compliance Pathway 2: Product Transfer Documents
What is it?
“Product transfer documents” (PTDs) is the general term for the paper trail that documents the transfer of ownership of fuel from one entity to the next. The Oregon DEQ, in ORS 340-253-0600, requires that the Clean Fuels Program (CFP) fuel pathway code be included on all PTDs, except for transactions after the fuel leaves the fuel terminal.
How will it work?
With this compliance option, the City proposes that all PTDs include the fuel pathway code, including those for transactions below the rack, which the Oregon Department of Environmental Quality currently exempts from this requirement.
Enforcement can be carried out through inspections of PTDs at retail, to verify that PTDs for renewable fuel listed a fuel pathway code that had an assigned CI value of 40 gCO2e/MJ or below.
The advantage of this approach is that no reporting to the City is required. The primary challenge to this approach is that it can only be implemented in cases where fuel is not co-mingled at the fuel terminals, i.e. stored unblended. Even in these (perhaps) rare cases, software used by importers, terminals, and distributors may make the addition of the fuel pathway code on PTDs difficult.
Diagram 1 below provides a visual representation of compliance pathways 1 and 2 and shows what would be required of fuel industry stakeholders in the importer, distributor, and retailer roles. The diagram also notes where reporting requirements differ when a CI averaging approach is used.
Timeline and next steps
BPS hosted a public meeting on June 15, 2023, to share implementation recommendations. The meeting was recorded and available on our website. After incorporating feedback from the public meeting, staff prepared a public comment proposed for additional public review.
Public comment period opened on June 27, 2023 and closed on July 25, 2023.
Read the proposed administrative rules:
For more information about the rulemaking process, requests to meet with staff, or other questions, please contact Kyle Diesner.