New gas standards mired in cost debate

bshannon@theolympian.comJanuary 17, 2014 

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A few top Republican lawmakers in the Senate have raised fears that a low-carbon fuels rule requiring use of more ethanol or bio-diesel in fuel mixes will drive up gasoline prices by 33 cents to $1.06 per gallon, if not more.

The fuel-cost claim – which Senate Republican Leader Mark Schoesler of Ritzville and the Senate Majority Coalition Caucus have cited as impediments to passing a gas-tax package this year – is based on a study that later came under fire.

It relies mainly on a Boston Consulting Group report done in June 2012 for the oil industry, which asserts that California’s fledgling fuel standard would shut down refineries, cost up to 51,000 jobs and boost fuel costs dramatically.

That Boston Consulting report’s assumptions were later criticized as too narrow by independent academic reviewers at the University of California, Davis in May 2013. For instance, it assumed reliance on ethanol from Brazil and counted job losses at refineries without taking into account local production of alternative fuels.

“Plausible alternative assumptions about fuel supply and demand response could lead to less dramatic cost increases for consumers and the refinery industry, perhaps much less dramatic,” the UC Davis Policy Institute’s analysis states.

The Western States Petroleum Association, which paid for the Boston Consulting Group report, also was one of three sponsors of the UC Davis review. Other studies have found fuel costs might not go up, and the dire picture predicted for California has not yet come true.

In a 2011 report for the Washington state Department of Ecology, consulting firm TIAX found that in five out of six scenarios – the exception being the importation of all alternative fuels from out of state — that wider use and local production of renewable fuels would add jobs, income and economic value to the Evergreen State.

The fuel standard issue has come up because Gov. Jay Inslee is leading an effort to reduce greenhouse gas emissions linked to global warming.

A fuel standard is among ideas Inslee and Democratic lawmakers on his bipartisan workgroup have considered. Republicans on the Climate Legislative and Executive Workgroup are pushing back against anything they perceive as having a cost.

That dispute over how to reduce carbon emissions recently spilled into the transportation debate, with Republicans saying they find it difficult to muster support for a gas-tax increase to pay for road projects when motorists might also be facing higher fuel costs because of possible carbon-fuel standards.

Inslee’s aides and environmentalists say the hubbub is a red herring to draw attention away from the Senate’s inability to agree on a transportation plan.

Leidos, a consulting firm hired by Inslee’s climate change workgroup, reviewed the literature on carbon fuels last year. One of its reports acknowledges the potential costs in the Boston Consulting report and the possibility of increased costs for fuels.

But it also notes the other scenario painted by TIAX and Ecology. Its analysis also says that fuel costs might be transferred between oil and renewable fuel industries but that “the price of fuel is assumed not to change as the result” of a low-carbon fuel standard.

Inslee has taken that position, too. He denies the GOP’s claims he might be quietly impose a fuels standard by executive order or rule-making without legislative review.

Inslee said in a letter sent Thursday to Schoesler, Senate Transportation Co-chair Curtis King, R-Yakima, and two other Senate Majority Coalition Caucus leaders that he still thinks a fuel standard could be one of several actions the state should take to reduce greenhouse gas emissions that are linked to global warming.

Inslee added that he does not have a fuel standard proposal in hand. But, he said, “studies show that a properly constructed, clean fuel standard could actually save money at the pump.’’

Republican Rep. Shelly Short of Addy serves on Inslee’s climate workgroup and is concerned by what Inslee might do. Short is drafting legislation to require action on a fuel standard to go through the Legislature.

“What we need to do is have it fully aired, analyzed and have a full public process,’’ she said.

The lawmaker acknowledged that she – like King – was relying on the Boston Consulting Group’s cost estimates. “The dollar (per gallon) is definitely on the higher range. This depends on how the policy is structured,” she said. “The devil is in the details. It totally depends on the kind of program you put in place.”

Brad Shannon: 360-753-1688 bshannon@theolympian.com

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