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Northeast Markets Eyed for Oil Sands as Clean Fuels Standard Fades

A clean fuels effort among 11 Northeast and Mid-Atlantic states is fading, as new pipelines for tar sands crude to the Atlantic get an industry push.

Mar 29, 2012
An aeriel view of Irving Oil's refinery in New Brunswick, Canada, which supplies

In New Jersey, Gov. Chris Christie's administration pulled out of a proposed pact to cut global warming emissions in transportation fuels.

In New Hampshire, the House passed a bill to leave the same regional initiative. And in Maine, the government opted to continue to engage in the program, but not to apply the rules to its own transportation sector.

In those three states and others, leaders are reevaluating their role in the Clean Fuels Standard, a policy that limits consumption of high-carbon fuels like oil sands crude, as pressure from oil industry-backed groups mounts and support falls off. And it is happening just as the region's entire fuel picture may be about to change.

A Montreal pipeline firm plans to transport tar sands oil to the Atlantic Coast for the first time by reversing the flow of its Maine-to-Quebec oil pipeline. Enbridge, Canada's largest pipeline company, has its own plans to link to that Montreal line and carry Alberta crude east. And TransCanada Corp., the company behind the proposed Keystone XL pipeline, wants to pipe oil from tar sands mines to refineries in Ontario, Quebec and potentially to a New Brunswick facility that supplies fuel to the Northeast.

Since late 2009, 11 states in the Northeast and Mid-Atlantic region—New Hampshire, New Jersey, Maine, Connecticut, Delaware, Maryland, Massachusetts, New York, Pennsylvania, Rhode Island and Vermont—have been developing the Clean Fuels Standard. The idea was to create a policy modeled on California's pioneering Low-Carbon Fuel Standard, which requires oil refiners and suppliers to reduce the carbon intensity of their fuel mix by 10 percent in 2020. The Northeast pact is expected to be completed next year.

But opponents have been ratcheting up efforts to keep a California-style standard from taking hold in the Northeast, and they're finding receptive audiences in some Republican-leaning states.

Now, all participants are considering alternatives, including making the program voluntary.

Leading the charge to block the rules are two organizations: Americans for Prosperity (AFP), a group founded and funded by oil industry interests—including the conservative billionaires Charles and David Koch—and the Consumer Energy Alliance (CEA), which represents oil and gas producers, business councils and energy trade associations. Both argue that fuel emissions requirements would raise gas prices and cost the region hundreds of billions of dollars.

AFP launched a campaign last year to convince states to exit the Regional Greenhouse Gas Initiative (RGGI), the nation's first cap-and-trade program for curbing greenhouse gases. Nine of the 11 states in the Clean Fuels Standard are part of RGGI; Pennsylvania never joined the cap-and-trade effort and Christie withdrew New Jersey late last year. Legislative attempts to force a withdrawal in New Hampshire, Delaware and Maine failed. A study found that every RGGI state has benefited economically from the pact.

AFP has been active in New Hampshire trying to repeal the Clean Fuels Standard, which it calls "liquid RGGI."

In recent years, CEA has focused on fighting California's low-carbon fuel standard. The group is embroiled in a two-year-old lawsuit to strike down that mandate. In 2010, it poured $1 million into television and radio ads to block an attempt by Sen. Debbie Stabenow (D-Mich.) to pass a national low-carbon fuel standard.

CEA told InsideClimate News it has met with legislators, governors and regulators in the Northeast to get them to reconsider.

CEA's president is David Holt, a managing partner at HBW Resources, a lobbying and public affairs firm whose clients include the American Petroleum Institute (API), the largest oil industry trade group, and the Center for North American Energy Security (formerly the Center for Unconventional Fuels), an industry a group created to promote oil sands development. CEA is run out of the Houston offices of HBW Resources.

Michael Whatley, CEA's executive vice president, said that "even though the oil and gas guys are members of our organization ... they don't drive the train, and they certainly don't drive the policy."

Where are the Supporters?

Advocates of the Clean Fuels Standard say the policy is key to cutting climate-changing pollution and to spurring the market for clean cars.

But just as opponent campaigns have gotten more aggressive, supporters have slowed down their advocacy efforts, and the process has lost steam, several policy experts told InsideClimate News.

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