Posted Wednesday, 17 July 2013, 05:19
In April of 2009 the California Air Resources Board (CARB) approved the Low Carbon Fuel Standard (LCFS) regulation, which came into effect in January of 2010. The LCFS is one of few initiatives in the world to regulate the lifecycle carbon intensity of transportation fuels. Its aim is to reduce by at least 10 percent the carbon intensity of California’s transportation fuels by 2020. Since its inception, several regulatory amendments to the regulation have been adopted, following feedback from stakeholders through an ongoing series of public consultations (see here).
In its last public workshop (June 20th, 2013), CARB presented an amendment to the innovative crude methods provision. The objective of the provision has been to spur technological innovation in upstream emissions reductions. Currently, the provision includes crediting for carbon capture and sequestration (CCS) and solar thermal steam generation, with a minimum threshold of a 1 gram per megajoule (g/MJ) reduction in fuel carbon intensity for projects to be considered. CARB announced that it is considering expanding the provision to include crediting to solar and biomass based power generation (see presentation here). As part of this amendment, credits will now be accrued by crude producers rather than refineries, be based on volumes of finished products sold in California and not be limited by the previous 1g/MJ threshold. Removing the threshold will allow smaller trial projects at large fields to still be credited. In addition, CARB has shown openness to considering alternative innovative methods (e.g. CO2 flooding) proposed by interested parties subject to technical review.
Despite several new innovative methods coming into market in the oil industry, to date no credits have been generated through the current innovative methods provision. In California, GlassPoint Solar and BrightSource Energy are leading the way in solar thermal steam generation. Their process uses solar thermal power to generate steam that is injected in wells during the oil recovery process. Whereas enhanced oil recovery (EOR) has traditionally used natural gas for this process, steam generated through solar power has in some cases become a viable alternative. GlassPoint has recently partenerd with Berry Petroleum to provide approximately 1 million Btus per hour of solar heat for the McKittrick oil field in Kent County, CA. Similarly, BrightSource has teamed up with Chevron Corporation to provide solar steam generation - through a 29 megawatt facility - to their Coalinga field in Fresco County, CA. As for CCS - consisting in the long-term storage of CO2 by injecting it into existing geological formations - there are currently no projects developed in California that would be eligible for credits.
The innovative methods provision forms part of the 'California average' reporting and accounting methodology adopted by CARB for the LCFS in December of 2011. Under this system, if the average carbon intensity of California crude in a given year is higher than the baseline carbon intensity, all fossil fuel suppliers are allocated deficits in proportion to the volume of fossil fuel supplied. In addition, regulated parties can get carbon credits if they demonstrate that the oil is extracted using innovative methods. The amendment proposed by CARB to this provision seeks to reduce the barriers for crediting while expanding the options for innovative technologies. In Europe, the European Commission has been considering crediting for upstream emission reductions projects under the Fuel Quality Directive. This has the potential to include innovative methods such as those previously mentioned but also credits for gas flaring which are not included under the CARB provision since they are not deemed innovative.
In addition to the innovative methods amendment, CARB also introduced a refinery specific incremental deficit calculation for crediting. Under this proposal, refineries will be given the choice of complying as a group or opting-out to comply individually with credits granted on any incremental deficits generated. Credits for refineries choosing to opt-out will be accrued based on their own baseline constructed through information provided by the regulated party on volumes of imported intermediate and finished products. It is likely that refineries will be given a sole window of opportunity to decide whether to opt-out or not. However, the details of this provision are still being reviewed including the possibility of having company level compliance.