WSR 19-21-040

PROPOSED RULES

PUGET SOUND

CLEAN AIR AGENCY

[Filed October 8, 2019, 4:50 p.m.]

Original Notice.

Proposal is exempt under RCW 34.05.310(4) or 34.05.330(1).

Title of Rule and Other Identifying Information: Proposed Regulation IV of the Puget Sound Clean Air Agency, Clean Fuel Standard (CFS).

Webpage address http://www.pscleanair.org/CleanFuelStandard.

Hearing Location(s): On December 19, 2019, at 12:30 p.m., at the Washington State Convention Center, 705 Pike Street, Seattle, WA 98101-2310. Public comment will be taken from 12:30 to 4:30 p.m., and 5 to 8 p.m.

Date of Intended Adoption: The agency estimates no sooner than February 27, 2020.

Submit Written Comments to: Kathy Strange, 1904 3rd Avenue, Suite 105, Seattle, WA 98101, email CleanFuels@pscleanair.org, fax 206-343-7522, by January 6, 2020.

Assistance for Persons with Disabilities: Contact agency receptionist, phone 206-689-4010, fax 206-343-7522, TTY 800-833-6388 or 800-833-6385 (Braille), email christinab@pscleanair.org, by December 9, 2019.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The purpose of this proposed rule is to reduce and/or limit greenhouse gas (GHG) emissions to protect human health and the environment. The proposed rule would achieve the above through a reduction in the life cycle carbon intensity of transportation fuels that are sold, supplied, or offered for sale in the agency's jurisdiction (King, Kitsap, Pierce and Snohomish counties). The proposed rule would result in a life cycle carbon intensity reduction of up to twenty-five percent by 2030.

The proposed rule sets annual life cycle carbon intensity reduction benchmarks, starting with a reporting year only. Fuels whose carbon intensities are above the reduction benchmark generate deficits, and fuels whose carbon intensities are below the reduction benchmark generate credits. One credit or deficit is equal to one metric ton of carbon dioxide equivalent (CO2e). Each year, deficit producers are required to "retire" credits in equal proportion to their deficits in order to comply with the program; this can include a variety of mechanisms: Purchasing credits from credit generators, coprocessing biomass into renewable fuels, and/or generating credits through the refinery investment credit program.

Regulated entities required to participate include importers and producers of fuels such as gasoline, diesel, ethanol, biodiesel, and fossil compressed natural gas (CNG) and liquefied natural gas (LNG). Providers of fuels with a carbon intensity lower than the benchmark (credit generators) are eligible to "opt in" to CFS if they want to generate and sell credits. Opt-in fuels include electricity, bio-CNG, bio-LNG, hydrogen, renewable propane, and alternative jet fuel. The proposed rule includes exemptions for specific fuel applications, including interstate locomotives, ocean-going vessels, aircraft, military tactical vehicles and tactical support equipment, and small volume fuel producers and fuels used in small volumes.

In addition to the above, the proposed rule includes provisions that detail:

The agency estimates that the proposed rule, with corresponding carbon intensity (CI) reductions in transportation fuel of fifteen percent, twenty percent, and twenty-five percent, would result in annual reductions of 1.8, 2.3, and 3 million metric tons GHG emissions by 2030, respectively. Using the Washington utilities and transportation commission (UTC) recommended value for the social cost of carbon in 2030 ($87/ton), the annual avoided costs would be approximately $150 million, $200 million, and $260 million, respectively, per year in 2030, (see UTC, social cost of carbon, https://www.utc.wa.gov/regulatedIndustries/utilities/Pages/SocialCostofCarbon.aspx). The social cost of carbon includes property and infrastructure damage and mitigation, agricultural losses, energy costs, and health impacts, but it is not considered exhaustive. (EPA1, WUTC2, Washington state department of ecology3.)

The agency estimates that the proposed rule will result in the reduction of harmful criteria pollutants and air toxics, particularly in communities located along major roadways. The agency estimated the fine particle pollution emissions reductions associated with CI reductions of transportation fuel. Through the agency's consultant, ICF, the agency estimated the corresponding monetary value of avoided deaths from reducing these emissions, using EPA's Benefits Mapping and Analysis Program (BenMap) (see ICF for Puget Sound Clean Air Agency. Puget Sound Regional Transportation Fuels Analysis, Final Report. September 2019, http://www.pscleanair.org/DocumentCenter/View/3809/Clean-Fuel-Standard-Technical-Analysis---Final-Report?bidId=). The results showed an estimated annual value of $10 to $40 million reduced costs per year based on avoided deaths. These results do not include other health endpoint reductions for fine particle pollution including: Asthma exacerbation, chronic obstructive pulmonary disease, work loss days, nonfatal heart attacks, etc.4 Qualitatively, the agency also anticipates a reduction in mobile source air toxics from this rule, including known carcinogens such as benzene and diesel particulate matter.5,6 A reduction in these pollutants corresponds to a reduction in potential cancer risk, and the impact will be greatest for communities with greatest current exposure (those along major roadways).

Through the agency's consultant, ICF, the agency developed several compliance scenarios that could meet a regional CFS and developed corresponding cost of implementation estimates. ICF modeled the macroeconomic cost and benefits of those scenarios across the agency's jurisdiction using the REMI model. The main costs to implement the rule stem from investments that fuel producers must make to comply with the rule, as well as the differential (increased) cost to purchase electric vehicles compared to conventional internal combustion engine vehicles. The CFS provides flexibility for fuel producers to reduce their costs of compliance, but the agency conservatively modeled that they do little to reduce their cost of compliance, and pass most of it on to consumers. Additionally, the extra cost to purchase electric vehicles is forecast to decrease substantially over time. These combined costs are largely offset by savings from CFS that comes in the form of reduced fueling costs, due to electric vehicles being much cheaper to fuel than internal combustion engines. For the life cycle carbon intensity reduction of up to twenty-five percent by 2030 (scenario D), overall, these costs and savings offset each other: Across the four counties the impact on both employment growth and gross regional product growth was one tenth of one percent or less. See ICF for Puget Sound Clean Air Agency. Puget Sound Regional Transportation Fuels Analysis, Final Report. September 2019, http://www.pscleanair.org/DocumentCenter/View/3809/Clean-Fuel-Standard-Technical-Analysis---Final-Report?bidId=.)

Reasons Supporting Proposal: In February 2017, the agency's board of directors adopted science-based climate targets to reduce GHG emissions by fifty percent in 2030 and eighty percent by 2050 (below 1990 levels). Since almost half of all GHG emissions in the agency's jurisdiction are from the transportation and mobile sector, the agency's board of directors directed staff to analyze potential strategies to reduce GHG emissions in this sector. An analysis of a range of potential strategies to reduce transportation GHG emissions indicated that a CFS would result in substantial reductions in transportation-related GHG emissions (see Puget Sound Clean Air Agency. Candidate Actions to Reduce Transportation Greenhouse Gas Emissions - Evaluation Report, June 2018, http://www.pscleanair.org/DocumentCenter/View/3314/Evaluation-Report_Transportation-Actions_June2018?bidId=).

A subsequent report indicated that a regional clean fuel standard is feasible to implement with forecasts of currently available fuels (see ICF for Puget Sound Clean Air Agency. Puget Sound Regional Transportation Fuels Analysis, Final Report. September 2019, http://www.pscleanair.org/DocumentCenter/View/3809/Clean-Fuel-Standard-Technical-Analysis---Final-Report?bidId=). As stated above, the ICF report showed a clean fuel standard provides public health cobenefits through reduction of fine particle air pollution, particularly in communities near major roadways. The report also included a macroeconomic impacts review and concluded that for the life cycle carbon intensity reduction of up to twenty-five percent by 2030 (scenario D), impact to the regional economy (as measured by changes to employment and gross regional product growth) was almost indiscernible: One tenth of one percent or less, positive or negative.

Statutory Authority for Adoption: Chapter 70.94 RCW.

Statute Being Implemented: Chapter 70.94 RCW.

Rule is not necessitated by federal law, federal or state court decision.

Agency Comments or Recommendations, if any, as to Statutory Language, Implementation, Enforcement, and Fiscal Matters: Under chapter 79.94 RCW, the agency may adopt rules in its jurisdiction establishing emission standards for types of emissions or types of sources of emissions, or a combination of these. The proposed CFS is intended to establish emission standards for GHGs from producers, importers, and distributors of transportation fuel that supply the agency's four-county jurisdiction (King, Kitsap, Pierce and Snohomish counties).

Name of Proponent: Puget Sound Clean Air Agency, governmental.

Name of Agency Personnel Responsible for Drafting, Implementation, and Enforcement: Kathy Strange, 1904 3rd Avenue, Suite 105, Seattle, WA 98101, 206-689-4095.

A school district fiscal impact statement is not required under RCW 28A.305.135.

A cost-benefit analysis is not required under RCW 34.05.328. RCW 34.05.328 does not apply to local air agencies, per RCW 70.94.141(1). However, costs considerations are discussed above.

This rule proposal, or portions of the proposal, is exempt from requirements of the Regulatory Fairness Act because the proposal:

Is exempt under chapter 19.85 RCW.

Explanation of exemptions: Chapter 19.85 RCW does not apply to local air agencies which is not a state agency (see RCW 70.94.141(1)). However, cost considerations are discussed above.

October 8, 2019

Craig Kenworthy

Executive Director