Study faults CARB system industry says favors foreign oil

An oil industry-supported study has highlighted concerns Sacramento agrees should be addressed to make sure foreign crude doesn’t get an unfair market advantage over in-state production because of data gaps in California’s system for rating fuels’ “carbon intensity.”

The report last month by the nonprofit Institute for Energy Research pointed to what it called serious flaws within Stanford University’s Oil Production Greenhouse Gas Emissions Estimator, or OPGEE, which the California Air Resources Board uses to determine combustion costs assigned to refineries.

CARB disputed some of the report’s conclusions by email, but it conceded the OPGEE system would be more accurate if it took into account more data from oil producers foreign and domestic. It noted the agency was already considering crediting domestic producers for cutting methane emissions, which was one recommendation in the report.

Where the two sides may continue to disagree is whether the state is properly estimating emission volumes associated with imported oil. OPGEE uses a default value the IER study says is unrealistic but which CARB defended as contributing to a “conservatively high” climate intensity score for foreign oil.

The state’s Kern-centric oil industry has long accused the Newsom administration of hobbling California producers by tightening scrutiny and banning certain technologies while refusing to acknowledge environmental and labor conditions in Ecuador and Saudi Arabia, California’s top-two foreign sources. With the IER study released July 18, the industry sees what it considers fresh evidence of an uneven playing field amid the state’s gradual transition to a cleaner-energy future.

The CEO of the California Independent Petroleum Association trade group, Rock Zierman, called for fixing OPGEE not just because the system is used to set state targets, but also because its rankings are cited by industry critics.

“Those groups are actively calling for the state to replace in-state production (70 percent in Kern) with imported foreign crude and justifying it with the false notion that imports are ‘cleaner,’” Zierman said by email.

Stanford, which devised and

maintains OPGEE, did not respond to requests for comment.

A group of environmental and environmental justice advocacy groups active in oil regulation policymaking declined to comment on the IER study.

For its part, CARB opened the door to limited adjustments to the system, including new credits for in-state producers. It said the agency “is open to operators submitting more specific field data to potentially supplement the inputs used in OPGEE.”

IER, championed by the industry for its research on domestic energy policies, noted in a review released July 18 OPGEE is supposed to estimate emissions created in the production, processing and transport of transportation fuel. The system determines deficits and credits that, as part of California’s Low Carbon Fuel Standard, cost refiners more or less money depending on where the fuel they process comes from.

The study lists several ways it says OPGEE overstates the carbon intensity of oil produced in California and understates that of foreign oil.

It alleges the system ignores actual, verified data CARB already has gathered on oil produced in the state, and that the state’s use of the system underrepresents emissions from Ecuador and Saudi Arabia.

OPGEE also ignores the impact of California mandates on greenhouse gas reductions and the fact foreign producers do not participate in the state’s cap-and-trade air pollution program, said the review, put together by Catalyst Environmental Solutions Corp., a Santa Monica consulting firm specializing in areas including the energy sector, and Yorke Engineering, a San Juan Capistrano-based firm focused on environmental permitting and compliance.

“Each of these factors individually disadvantages in-state production in favor of imports. Combined, these errors create a greatly skewed picture of the CI of California production,” the report stated. “This means that compliance with the LCFS is easier if imported crude oil is used in preference to domestic, in-state production.”

It said simply applying data on greenhouse gas reduction successes would show substantial, ongoing reductions in the carbon intensity of oil produced in California.

“If the goal is GHG reductions,” it said, “then fixing the OPGEE model should be an immediate priority.”

CARB’s emailed comments on the IER review opened with the general observation that California crude tends to be heavier than primary foreign sources refined in the state.

In many cases steam is required to produce oil in the state, which in turn raises its OPGEE carbon intensity score.

Regarding accusations CARB ignores its own, verified data on oil intensity, the agency said the information it has isn’t designed to support the full lifecycle analysis OPGEE requires. For example, it said its data doesn’t address land use changes, transportation or upstream production of process fuels like natural gas.

It invited California oilfield operators to provide detailed, field-specific data on production methods that could be taken into account by OPGEE.

CARB denied IER’s allegation it underestimates pollution emitted by tankers bringing foreign oil to U.S. ports. It said the study erred in reporting OPGEE calculates transportation emissions using a default of 5,082 miles and that it only accounts for one-way trips. In fact, CARB’s email stated, it incorporates all 13,076 miles to Saudi Arabia plus the full distance back.

On the question of allegedly inaccurate estimates of emissions from production of foreign oil, CARB noted OPGEE assigns default parameters when it doesn’t have oilfield-specific data, which is often the case with foreign-supplied crude. It defended those defaults as being based on the best information available even as it acknowledged the system isn’t perfect.

“CARB staff believes that these default parameters generally result in conservatively high CI (carbon intensity) estimates for crudes that are lacking in more specific field input data,” it wrote.

The agency went on to say it’s not ignoring the impacts of greenhouse gas reduction programs. Rather, CARB said it has been looking at updating its modeling to better reflect in-state methane reductions. But it rejected the idea of giving greater weight to the use of solar power in oil production, saying credit is already given to companies doing such work.

Zierman at CIPA cautioned against assuming the foreign oil California imports is always lighter than crude produced domestically. Because refineries in the state take mostly heavy oil, he said, stricter regulation under the Newsom administration means California oil is increasingly being replaced by heavier imports.

“That is why imports from Ecuador, which are heavy, are now the number one source of imports into CA,” he said.