California Air Resources Board

Three energy companies have agreed to fines totaling $785,000 following investigations by the California Air Resources Board (CARB). All three companies violated provisions of the Low Carbon Fuel Standard (LCFS), which is critical part of California’s greenhouse gas (GHG) reduction efforts.

“The Low Carbon Fuel Standard is critical to California’s effort to fight the worst impacts of climate change, achieve its mandated GHG reductions, and to provide consumers with more clean fuel choices” said CARB Executive Officer Richard Corey. “It is not a new regulation and there is no good reason for compliance failures.”

• SK Energy Americas agreed to a $395,000 penalty for failure to meet the carbon intensity target for 2014.
• Alon USA and subsidiary, Paramount Petroleum have agreed to pay a $300,000 civil judgment for failure to accurately report fuel transactions.
• Kern Oil & Refining agreed to a penalty of $90,000 and forfeiture of 15,838 LCFS credits for misreporting the type of low carbon fuel it sold (These credits are currently worth nearly two million dollars.)

CARB first approved the LCFS in 2010 with compliance starting in 2011. The LCFS requires that companies producing fuel for use in California lower the carbon in their production process 10 percent by 2020.

The regulation requires that fuel suppliers meet, on an annual basis, a clean fuel target for the vehicle fuels they sell in California. If an individual fuel they supply is below that annual target its carbon emissions are lower and it generates marketable credits for the producer; fuels above that number generate deficits. If producers are unable to supply enough low-carbon fuels in a year to meet the annual target, they must acquire credits from other fuel suppliers in the marketplace to make up the deficit. SK Energy Americas agreed to pay the $395,000 penalty because it failed to cover its deficit in 2014.

All producers are required to accurately report the types of fuel produced for sale in California and transactions for sale of that fuel. CARB took Alon and Paramount to court for their failure to accurately report its sales. Kern Oil was fined for inaccurate reporting of fuel type, and in addition to the fine CARB invalidated the credits associated with the misreported batches of fuel.

The LCFS is a tool critical to achieving California’s 2020 GHG emission reduction goal of a return to 1990 levels. It will also be important in reaching the legislatively mandated 2030 reduction goal of 40 percent below 1990 levels and 2050 target of reductions 40 percent below 2030 levels.

CARB is amending the LCFS starting in 2021 to require fuel producers to reduce emissions an additional 20 percent by 2030. The amendments will also bring more alternative fuels, such as jet fuels, into the program, and add a third-party verification program. Another amendment will create a variety of credits and partial credits for electric vehicle electrification to promote development of electric vehicle infrastructure called for in Governor Brown’s Executive Order B-48-18