For California and other states that want to emulate its precedent-setting low-carbon fuel standards (LCFS), some industry leaders are warning that there may be unintended environmental and economic consequences waiting around the bend.
California producers are required to report carbon emissions under the LCFS and the state’s cap-and-trade program. Eventually a net result may be the lowering of natural gas demand in the nation’s most populous state. Some of California’s production fields have a carbon footprint equal to, or in some cases greater than, Western Canada’s oilsands production. The news that a barrel of California crude could produce more carbon dioxide (CO2) than the oilsands has environmentalists raising red flags.
The Western States Producers Association (WSPA), which has opposed the LCFS, contends that there is more to the story, and with mandates for ever-lower carbon emissions the state could end up raising the carbon footprint from the production, refining and distribution of petroleum products. WSPA does not deny the accuracy of comparisons of California crude, concluding that it can be higher in carbon-intensity than oilsands supplies, but the reason is not the crude itself, but the fact that a majority of the supplies use natural gas-fired enhanced recovery technologies involving steam injection.
The California Air Resources Board (CARB), which regulates both the LCFS and cap-trade programs, counts the carbon footprint of natural gas used in the steam injection (and in cogeneration producing electricity) in calculating the overall carbon-intensity of the oil supplies produced.
“All of this has very little to do with reducing global emissions and climate change and everything to do with CARB’s insistence on placing carbon intensity values on every crude oil source in the world as part of the LCFS,” a WSPA spokesperson told NGI.
Some critics think there need to be other forms of enhanced oil recovery (EOR), and within the industry, majors like Chevron Corp. reportedly are experimenting with the use of solar energy to produce the steam used in EOR instead of natural gas.
For now, however, WSPA is telling policymakers that the practical implications of the LCFS may force California producers to export their supplies, and refineries may have to import more crude that carries a lower carbon-intensity. The WSPA spokesperson labeled this as “absurd.”
“It is difficult to believe that is what people had in mind when they created this regulation,” he said.
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