Low-Carbon Fuel Standard Would Have Negative Impact on Construction

Washington State is considering the implementation of a low-carbon fuel standard (LCFS). While some of the effects of such a policy on the construction industry are unknown because it has yet to be tried anywhere the things that are known about the policy are not good.

The push for a low-carbon fuel standard is coming from two directions: The Governor’s Climate Legislative Executive Workgroup (CLEW) will soon be making its recommendations for greenhouse gas-fighting policies the state could adopt and the LCFS is going to be one of those recommendations. Plus Governor Inslee signed a pact with other western states and British Columbia that promises to enact greenhouse gas policies regionally including a LCFS. Neither of these actions actually creates new policies; they are more suggestions of what the state could do regarding greenhouse gases. In any event these are strong indications of upcoming legislative battles.

The draft CLEW report talks about implementing a LCFS of a 10% reduction in the carbon intensity of the fuel mix over a ten-year time period in the State of Washington. It doesn’t prescribe what the fuel mix will be; just that it should have lower carbon intensity.

Keep in mind that for years refineries have been making fuel with 10% ethanol for many markets. But even a 10% ethanol mix reduces the fuel’s carbon intensity by only 1%.  Adding even more ethanol (and it would take a lot more!) has been shown to dissolve seals and gaskets in engines. Fuels with something else – such as agricultural waste products – has never been developed in the mixes needed to reach the 10% carbon intensity reduction.

So without a real-world test it’s hard to say what the affect would be of a not-yet-developed fuel mixture on construction equipment and vehicles. But as AGC’s Oregon-Columbia Chapter pointed out in battling a similar proposal in Oregon converting to higher biofuel-content fuels would affect truck engine warranties. Currently there are percentage limits on blended fuels which when exceeded will void many manufacturers’ warranties. It is very likely that construction equipment and vehicles would have to at least be retrofitted to accommodate blended fuels as was the case for recent clean-air rules and their impact on older diesel-powered equipment.

Other concerns raised about the Oregon proposal include:
• The limited supply of biofuels in the US would likely trigger fuel shortages and spikes in fuel-production costs and industry analysts forecast that as a result fuel costs could go up by as much as $1-$1.50 per gallon.
• Retro-fitting equipment to handle these biofuel blends is incredibly expensive. The majority of contractors would be faced with making changes they cannot afford while only some contractors are able to make the necessary investments in biofuels/energy production technologies on-site fueling depots total fleet conversions and all of the costs associated with these capabilities.
• The LCFS proposal is modeled on California’s Low-Carbon Fuel Standard program which was recently ruled unconstitutional in a United States District Court based on the Interstate Commerce Clause.
• This kind of program is not feasible at the state level. These policies should instead be a matter of discussion at the federal level. In fact there are already federal mandates in place for advanced biofuels technology through the Federal Renewable Fuel Standards (RFS) program.

A LCFS was first attempted in California. However the policy there is now tied-up in the courts at an early stage of enactment so the full 10% reduction in greenhouse-gas emissions is not yet in effect. Oregon passed its law a few years ago but it is facing a sunset provision before reaching the implementation phase (AGC Oregon-Columbia Chapter is opposing any repeal of the sunset provision).

AGC of Washington will continue to oppose LCFS in this state. AGC members with questions or comments should contact Jerry VanderWood 206.284.0061.