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  • Oregon Takes Step Forward with Comprehensive Clean Fuels Program Overhaul
Oregon Takes Step Forward with Comprehensive Clean Fuels Program Overhaul
OR CFP
Friday, 10th January 2025
Mansift Kaur

Key Takeaways

  • On January 9, 2025, Oregon’s Environmental Quality Commission approved significant updates to its Clean Fuels Program, shifting the baseline carbon intensity for gasoline from 100.14 to 98.12 gCO2e/MJ and diesel from 101.74 to 104.92 gCO2e/MJ through the adoption of OR-GREET 4.0.
  • The overhaul, which takes effect in 2026, introduces strict chain-of-custody documentation for waste-derived fuels and mandatory third-party verification for operations generating over 6,000 credits and deficits.
  • The program also establishes a first-of-its-kind reserve account system for carbon capture and storage projects, using a risk-based formula that factors in financial ratings, World Justice Project Rule of Law Index rankings, and EPA Class IV well requirements to protect against potential CO2 releases.

On 4th October 2024, the Oregon Department of Environmental Quality (DEQ) proposed a rulemaking exercise to bring in modifications to the requirements and tools used to calculate Carbon Intensity for fuels under the state’s CFP.

In a significant move for climate action in the Pacific Northwest, Oregon’s Environmental Quality Commission has approved sweeping changes to the state’s Clean Fuels Program. The 2024 rulemaking package, approved on January 9, 2025, introduces substantial updates aimed at strengthening the program’s effectiveness and environmental integrity.

Figure 1: OR CFP Brokers’ Benchmark and Spot Prices

The Oregon CFP credit market has shown remarkable resilience, with prices surging to $50.25 per credit on January 9, 2025. This represents a significant recovery from the $37.25 price level observed when the changes were first proposed on October 4, 2024. The recent price point marks a return to levels last seen in early June 2024. Prices had reached a low of $20.50 on July 16, 2024 and have started rising since July 23, 2024. The price rebound suggests renewed market confidence in the program’s long-term stability, particularly given the newly approved framework for carbon capture projects and enhanced verification requirements set to take effect in 2026.

Overhaul of Carbon Intensity Calculations

At the core of the reform is the adoption of OR-GREET 4.0, replacing the 2018-era 3.0 model. This update brings significant changes to how carbon intensity is calculated for various fuels. Gasoline’s baseline carbon intensity under the new model will decrease from 100.14 to 98.12 gCO2e/MJ, reflecting improved modeling of crude oils processed in Washington’s refineries. However, diesel’s carbon intensity is set to increase from 101.74 to 104.92 gCO2e/MJ, due to new research revealing higher nitrogen oxide emissions from diesel engines than previously understood. Natural gas also sees an adjustment, with its carbon intensity rising to 81.89 from 79.98 gCO2e/MJ, accounting for greater methane leakage in pipeline infrastructure.

Figure 2: New Baselines Affecting Program Standards (Source: Oregon Department of Environmental Quality, Office of Greenhouse Gas Programs)

For gasoline, starting from a baseline of 98.62 gCO₂e/MJ in 2016-2017, the standard decreases gradually each year. By 2024, the target reaches 90.21 gCO₂e/MJ, reflecting an 8% reduction. This reduction continues, with carbon intensity aiming to reach 88.25 gCO₂e/MJ in 2025 (10%) and dropping further to 60.80 gCO₂e/MJ by 2035 and beyond, representing a 37% reduction (based on updated baseline post 2026).

Similarly, diesel starts with a baseline of 99.64 gCO₂e/MJ for 2016-2017. By 2024, the standard lowers to 90.84 gCO₂e/MJ, achieving an 8% reduction. The target for 2025 is 88.87 gCO₂e/MJ (10%), and by 2035, it reaches 64.72 gCO₂e/MJ, amounting to a 37% reduction (based on updated baseline post 2026).

Cracking Down on Waste Feedstock Claims

In response to concerns about potential fraud, the program is introducing stricter documentation requirements for waste-stream feedstocks. These materials, such as used cooking oil, receive favorable carbon intensity calculations because they’re recycled rather than produced from scratch. The new rules require attestations throughout the entire supply chain, from initial collection to final fuel production, particularly targeting international sources.

Expanded Verification Framework

The program is significantly broadening its third-party verification requirements. New rules mandate independent validation for fuel pathway applications and electricity reporting, though residential EV credits remain exempt. The requirements will affect operations generating over 6,000 credits and deficits, with verifiers given discretion on site visits beyond basic recordkeeping locations. For entities with California-approved applications, the program offers flexibility by accepting either California validation statements or recent annual fuel pathway report verification statements.

Pioneering Approach to Carbon Capture Sequestration

In an innovative move, Oregon is establishing a sophisticated reserve account system for carbon capture and sequestration (CCS) projects. This DEQ-controlled mechanism employs a complex risk assessment formula considering multiple factors:

  • Financial Risk: Based on company credit ratings
  • Social Risk: Evaluated using World Justice Project Rule of Law Index rankings
  • Management Risk: Assessed through facility access control measures
  • Site Risk: Determined by geological characteristics
  • Well Integrity Risk: Measured against EPA Class IV well requirements

The system creates a safety net by holding credits in reserve to protect against potential future CO2 releases. Unlike traditional approaches, these credits will be held indefinitely unless invalidated due to verified releases, with different procedures for intentional versus unintentional releases.

Implementation Timeline and Industry Support

The transition to these new standards will be gradual but structured. In 2025, fuel producers must submit calculations using both OR-GREET 3.0 and 4.0 models – the former to verify compliance with current certifications, and the latter to establish new carbon intensity values for 2026 and beyond. The DEQ has announced plans for comprehensive training sessions to help stakeholders navigate these changes.

Industry Response and Future Outlook

The rulemaking process has generated significant stakeholder engagement, with feedback focusing on several key areas. Some stakeholders requested delays in electricity verification requirements or longer transition periods for the new OR-GREET model. Others advocated for modifications to include climate-smart agricultural practices and book-and-claim systems for renewable electricity and natural gas. The department has also received input regarding concerns about low credit prices in the market.

Looking ahead, the DEQ plans to review the CCS reserve account provisions in 2029, demonstrating a commitment to program evolution based on real-world performance. The department emphasized that these comprehensive updates reflect extensive consultation with advisory committee members, industry stakeholders, and public comments, showcasing Oregon’s dedication to maintaining a robust and adaptable Clean Fuels Program.

Important Links

Oregon’s Proposed CFP Rulemaking to Streamline and Revamp Carbon Intensity Measurement | cCarbon

Oregon’s Move to Delay Clean Truck Regulations: An In-Depth Look at DEQ’s Updated Plan | cCarbon

Core Market Dashboard | cCarbon

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