Membership Comment Form: Renewable Liquid Fuel Policymaking Framework

Background

In 2020, the PPA Board of Directors established a goal to reduce heating oil emissions over a 30-year period. A link to the PPA board resolution can be found here. This resolution did not define any specific policy actions for the PPA to formally pursue. In 2021, the PPA Heating Fuels created a subcommittee to identify legislative and/or regulatory policy strategies for how the association can achieve these initiatives. This subcommittee included the following heating fuel retailers:

The following memorandum of understanding (MOU) was created and unanimously approved by the subcommittee in June and the presented to the PPA Heating Fuels Committee. The committee intends to formally consider this MOU for approval at the October 12 in-person committee meeting which will take place during the Fall Energy Conference & Annual Meeting.

The PPA would like to offer a open comment period for any member to share their feedback on this proposed policy framework. Any comments will be brought to the Heating Fuels Committee for consideration prior to the next scheduled meeting. We would ask members use the online form below or contact any of the subcommittee members listed above to provide your input.

Any version of MOU that would be approved by the PPA Heating Fuels Committee in October would then be brought to the PPA Board of Directors for final consideration/approval prior to establishing a formal association position.

Submit A Comment

Deadline to submit a comment is September 30, 2022

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PPA Renewable Liquid Fuel Policymaking Memorandum of Understanding (MOU)

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The following memorandum of understanding (MOU) was created and unanimously approved by the subcommittee in June and then presented to the PPA Heating Fuels Committee later that month. The committee intends to formally consider this MOU for approval at the October 12 in-person committee meeting which will take place during the Fall Energy Conference & Annual Meeting.

The PPA would like to offer a open comment period for any member to share their feedback on this proposed policy framework. Any comments will be brought to the Heating Fuels Committee for consideration prior to the next scheduled meeting. We would ask members use the online form below or contact any of the subcommittee members listed above to provide your input.

Any version of MOU that would be approved by the PPA Heating Fuels Committee in October would then be brought to the PPA Board of Directors for final consideration/approval prior to establishing a formal association position. Once an association position is established, the PPA would formally begin pursuing legislative/regulatory actions defined within the boundaries of the MOU.

Subcommittee Observations

The association recognizes climate change policy will continue to impact our membership at both a state and federal level moving forward. A recent membership survey indicated that 90%+ of PPA heating fuel members are concerned these policies will impact their business.

There is a wide range of membership perception regarding biodiesel. There is also a wide range of individual biodiesel adoption by PPA members.

The PPA recognizes biodiesel as a drop-in product that is available in nearly every terminal throughout the state. The existing B2 on-road diesel mandate has created infrastructure for the product that provides Pennsylvania with a competitive advantage to scale up future Bioheat adoption.

The PPA recognizes renewable diesel as an emerging fuel and should make parallel policy considerations to supports this product adoption as it becomes more prevalent in the marketplace.

Surrounding states (specifically New York) are adopting biodiesel and/or renewable hydrocarbon diesel minimal blend mandates that will advance the marketplace beginning in 2022. These mandates will potentially force PPA members who operate in multiple states to adopt minimum blend levels across their entire customer base.

Pennsylvania is the second largest natural gas producer in the country along with a Republican controlled legislature. These two factors have a significant impact on energy policymaking within our state and should be taken into account as a part of the association strategy. Assuming Republicans continue to maintain majority, Pennsylvania will most likely lag behind other states in electrification policies for thermal heating.

The current Pennsylvania Climate Action Plan acknowledges improved natural gas efficiency as a recommendation to meet short term (5 – 10 years) state GHG emission goals. NORA data calculates a B18 heating fuel as having a better carbon score compared to natural gas. Transitioning to a product that is cleaner than natural gas would be a helpful public policy initiative for our industry.

Establishment of a Minimum & Maximum Policy Threshold

The subcommittee recommends creating a minimum and maximum blending threshold for the association to pursue by legislative and/or regulatory action. This “sandbox” would provide the PPA government affairs team with the flexibility to pursue policy goals within a specific parameter that is approved by our membership. The PPA would then continue to utilize a retail membership subcommittee to help shape policy considerations on a real time basis.

  • Minimum Blending Threshold: At a bare minimum, the PPA should pursue biodiesel and renewable diesel policies for heating oil that will establish a baseline B2 blend across the state. This would align with the current B2 on-road diesel mandate.
  • Maximum Blending Threshold: At an absolute maximum, the PPA should pursue biodiesel and renewable diesel policies for heating oil that will establish a B20 blend across the state.
    • Note: Achieving this blend would be a significant policy milestone in Pennsylvania. A B20 blend would produce a 14.6% reduction in CO2 emissions and establish a better carbon score compared to natural gas.

Potential Policy Actions

1. Pursuing State Funding for Infrastructure
Establishing a maximum blending threshold would allow the PPA to publicly pursue any state opportunities (ex: RGGI funding) that could potentially assist the heating fuel industry to subsidize biodiesel and/or renewable hydrocarbon diesel infrastructure.

2. Dealer Incentive Based Programs

The PPA will actively support policy to extend the provisions of the Pennsylvania Alternative Energy Portfolio Standard to include biofuel. This project will adhere to the following principals:

  1. The enactment of a Thermal Renewable Fuel Standard that will establish the valuation of the credit system to incentivize the use of biofuel in heating oil.
  2. The incentive program will be strictly voluntary.
  3. The credits generated by this program will be limited to parties providing the product to end users of the heating fuel.
  4. The proposed legislation would require the establishment of the licensure of aggregators to facilitate the participation of all heating oil dealers desiring to enter the program.
  5. A minimum biofuel content within the B2 – B20 threshold will be established in order to be eligible for the incentive program.

The PPA will also pursue any other dealer-based incentive program opportunities that provides the following benefits:

  • Biodiesel Blended Fuel Tax Credit for Retailers
  • Exemption of Bioheat from Gross Earnings Tax
  • Biodiesel Infrastructure Costs Tax Credit

3. Mandate Based Program

The PPA will actively pursue establishing a mandate for all heating oil sold for use in any building within Pennsylvania shall be bioheating fuel that contains at least 2% biodiesel and/or renewable hydrocarbon diesel with a maximum mandate of 20% biodiesel and/or renewable hydrocarbon diesel. This project will adhere to the following principles:

  1. The blending mandate would either increase based upon in-state production OR increase incrementally over a 10-year period.
  2. The maximum mandate would not exceed B20.
  3. The maximum mandate would not occur at a quicker pace compared to surrounding states (ex: NY).
  4. A consideration to also include off-road diesel as a part of a “package mandate” will be taken into account if there is an opportunity to include both products without major stakeholder opposition.
    1. Note: 14 states currently have some form of a biodiesel mandate in place for on-road diesel or heating oil. None of these states currently has an off-road diesel mandate in effect.

4. Carbon Offsets
The PPA will continue to explore potential programs that could initially offset industry emissions by up to 20%.