August 30, 2018

Executive Officer

California Air Resources Board

1001 I Street

Sacramento, CA 95814

Electronic Submission via https://www.arb.ca.gov/lispub/comm/bclist.php

RE: LCFS18 – Second 15 Day Comment Period for the Proposed Amendments to the Low Carbon Fuel Standard (LCFS) Regulation and to the Regulation on Commercialization of Alternative Diesel Fuels (ADF)

Dear Executive Officer:

Renewable Energy Group, Inc. (REG) appreciates the opportunity to comment on proposed amendments to the LCFS and ADF. REG is a leading provider of cleaner, lower carbon intensity products and services. We are an international producer of biomass-based diesel, a developer of renewable chemicals, and are North America's largest producer of advanced biofuel.

REG utilizes an integrated procurement, distribution, and logistics network to convert natural fats, oils, greases, and sugars into lower carbon intensity products. With 14 active biorefineries, a feedstock processing facility, research and development capabilities, and a diverse and growing intellectual property portfolio, REG is committed to being a long-term leader in bio-based fuel and chemicals.

Through the end of 2017, REG has produced nearly 220 million gallons of biomass-based diesel that has been delivered to the state of California resulting in approximately 2.25 million MT of carbon reduction for the residents of California.

We appreciate the time and energy CARB staff have committed to updating and clarifying the regulation following the Board hearing. Below are a few comments which we wish to highlight and emphasize for your additional consideration.

§95481. Definitions and Acronyms

REG supports the updated definitions of Animal Fat/Yellow Grease and Renewable Propane though we’d recommend changing the acronym from LGP to LPG.

§95483 – 95483.3. Fuel Reporting Entities, Opt-in Entities, LCFS Data Management System, and Change of Ownership or Operational Control

REG supports allowing 30 days in 95483.3 on the change of ownership.

§ 95486. Generating and Calculating Credits and Deficits

REG supports the clarification in 95486(a)(1)(B) with the reconciliation requirements being on obligated amounts. This will help avoid potential issues below the rack and other sales without obligation.

We advise CARB to reconsider setting a default energy density for alternative jet fuel. There are several potential chemical routes to produce this fuel which may result in fuels with different energy densities. Speaking from the prospective of a renewable diesel producer, fractional distillation is applied at the end of our process to separate out products which may include diesel, naphtha, LPG, and jet fuel. Depending on effectiveness of the separation and the specific setup of the biorefineries, our products may have different energy contents than a different biorefinery which employs the same technology.

EPA recognized this when crafting the RFS, requiring fuels such as renewable naphtha and renewable jet fuel to file equivalency value (EV) applications. These EV applications contain the lower heating value of the RIN generating fuel. We encourage CARB to require companies to use the lower heating value contained in each company’s EV application when calculating credits generated for naphtha, alternative jet fuel, and other fuels which energy content may vary from producer to producer.

§ 95486.1 Generating and Calculating Credits and Deficits Using Fuel Pathways

REG remains adamantly opposed to credits being generated on the day after the reporting deadline per (b) unless those deadlines are moved up to avoid moving from a 1 quarter delay to a 2 quarter delay on LCFS credit generation. As noted in prior comments, there are financial impacts from this proposal (estimated $0.13/gallon for an illustrative biodiesel producer).

This change will undoubtedly impact smaller and less well capitalized entities, whether they may have grasped the potential impact in their responses to CARB or not. Therefore, we continue to strongly encourage CARB staff to either move up the deadlines to the 20th of the last month for LCFS credit generation or allow liquid fuels opportunities for infrastructure projects as we suggested in July 2018 comments on 95486.2.

§ 95488. Entities Eligible to Apply for Fuel Pathways

REG looks forward to updating of all ours fuel pathways under the new simplified Tier 1 model. We encourage staff to allow reapplications to begin at the start of 2019. We believe that a longer lead time will avoid the workload issues faced by companies and CARB staff alike which resulted from the rush of new pathways in 2016 which stemmed from re-adoption.

§ 95489. Provisions for Petroleum-Based Fuels RICPP
Co-processing

We understand CARB’s desire to continue with designing a framework for co-processing, we recognize that co-processing is fundamental to CARB’s fuel neutral approach and we appreacite that CARB is holding a workshop on this issue. We believe that a new, separate rulemaking is required before any new pathways can be approved. While it has been CARB’s position that co-processing is a Tier 2 application, we disagree for several reasons. First, the current GREET 3.0 model does not support a framework for the evaluation of these pathways. Any effort to ‘build out’ GREET 3.0 to accommodate these pathways need to be subject to public review. It is our understanding that the model cannot be fundamentally changed without a public review. We encourage CARB to build a co-processing specific calculator which is incorporated into the regulation. Much thought and discussion needs to be had about how to calculate incremental energy demand related to co-processing, what is considered an appropriate baseline, how to account for adjustments in crude slate, and product yields. These are fundamental questions which will have significant impacts on these pathways. CARB ought to have specific, clear rules on these questions. They are beyond the realm of a guidance document or protocol and should be included in the regulation, similar to carbon capture and sequestration or the refinery investment and credit pilot program.

We believe that without a separate, public process to develop a co-processing framework, refineries will submit heavily redacted life cycle reports and life cycle models which will be so redacted as to yield public scrutiny impossible. REG has submitted several Tier 2 pathways, one of which received public comments. We welcomed these comments as sign that stakeholders care about the integrity of the program.

REG is also concerned that CARB will be encouraged by co-processors to validate the production of renewable gallons using a mass balancing method. This is unacceptable, no matter the feedstock or process utilized. As REG, NBB, and the Joint Research Center (JRC) can demonstrate, 14C radio carbon assay, whether conducted using method B or C of ASTM D6866 is extremely accurate and affordable.

Refinery Hydrogen Program
REG supports the change to this program to allow opportunities for stand-alone renewable diesel plants. We believe this change is consistent with the spirit of the regulation and allows for competition for biomethane within the marketplace. CARB should consider how verification of this program may function as many facilities share common utilities when located within a chemical park. For example, it is not uncommon for several facilities to share a single steam methane reforming system that supplies hydrogen to several facilities. We believe that a joint application per the new guidelines in the updated regulation would be an appropriate mechanism to accommodate for insuring the correct about of biomethane is purchased to cover the hydrogen utilized by the facility.

§ 95491. Fuel Transactions and Compliance Reporting,

As noted 95486, REG strongly advocates to keep the credit generation system as is. However, if it is changed so that no credits can be generated until after the reporting period is over, then we strongly recommend changing the reporting frequency and deadlines from 45/45 to 45/35 with deadlines being the 20th of the final month (June, September, December, and March) to avoid financial and working capital impacts.

§ 95491.1. Recordkeeping and Auditing

REG has concerns about a few changes proposed to the PTD requirements in (b)(1). First, the change to (b)(1), (b)(1)(F), (b)(2), and (b)(2)(B) will complicate transactions quite a bit so we recommend keeping the current language as is (“LCFS obligation is passed.”). For instance, when REG is passing obligation in the state of California, the credits have already been generated since they are generated off of import. Under the proposed change, a statement saying, “the LCFS obligation to act as credit generator,” would imply a second generation of credits.

Thank you for your consideration of our comments. Please feel free to contact us with any questions or comments.

Sincerely,

Scott R. Hedderich, Executive Director, Corporate Affairs