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CDFA Proposes Contentious Quality-Control Regulations for NGV Fuels

Coalition asks for more time to assess issues and consider alternatives; proposed methane number could pose financial hardship
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Photo courtesy Clean Energy.

August 15, 2016

None of the utility companies, clean fuel providers, and other natural gas industry stakeholders spoke in favor of proposed quality-control regulations at an Aug. 11 California Department of Food and Agriculture (CDFA) hearing. The CDFA wants to mandate the amount of methane in NGV fuels and impose labeling requirements to ensure a minimum level of fuel purity, similar to regulations governing the sale of gasoline. Unless the CDFA reworks its proposal, the regulation would take effect Jan. 1, 2017.
“It appears that the Department of Food and Agriculture doesn’t understand how the natural gas vehicle fuel industry works, based on the initial proposal,” said Coalition President Thomas Lawson, who attended the meeting. The Coalition also submitted comments.

Methane number mandate invites questions

At the heart of the issue is the CDFA’s suggestion of mandating a methane number of 75 in all natural gas fuels. Similar to the octane rating for gasoline, the methane number is a measure of the fuel’s antiknock property.

The proposed regulation raises complex questions: What should the minimum methane number be? Who would be responsible for ensuring that fuels comply with the number? How will companies bear the cost of meeting these regulations?

“We need more time to hammer out the complex issues raised by this potential regulation,” Lawson said. “That is underscored by the fact that not all CNGVC members could agree on the CDFA’s proposed fuel-quality specifications or how to amend them.”

Although no regulation currently controls the amount of methane in natural gas vehicle fuels, most fuels currently produced would meet the proposed number. The majority of fueling stations in California have access to those fuels, but those stations that do not would likely have to close until they can sell fuels that meet the proposed standard.

Retailers would bear burden of compliance

Under the proposed regulation, retailers would be responsible for ensuring that fuels meet the mandated methane minimum. Some stakeholders see this as a way for the CDFA to work around its perceived lack of authority to regulate utilities. But because stations don’t actually produce fuel, they may have to invest in expensive equipment to raise the methane number in the natural gas fuels they sell. They may also have to install additional equipment that can remove impurities from the fuels, or, in the case of CNG stations, blend in LNG.

In the draft proposal, the CDFA calls the effect on small business “minimal,” and cites only the costs to comply with dispenser labeling requirements. However, the agency has not considered the costs of remodeling existing fueling stations.

“The estimates don’t take a wide variety of issues into account,” Lawson said. “The CDFA needs to include a plethora of other costs in its proposal.”

“There is potential for significant compliance costs in some areas, and more work needs to be done to quantify these costs and determine how to pay for them,” concurred Tim Carmichael, agency relations manager for SoCalGas and former Coalition president. “SoCalGas believes more discussion, clarification, and analysis is needed for several components of the proposed standard, including the methane number level. It is very important to have coordination and alignment with national and international efforts to develop a new CNG standard.”

Support for labeling, need for consistent standard

The Coalition supports some aspects of the proposed regulation, including labeling fuel pumps with the minimum methane number and percentage of methane in the fuel. The Coalition agrees with the necessity of establishing a minimum methane number for NGV fuels, but with the caveat that different vehicles and engines may have different requirements.

At the meeting, Lawson called for a later implementation date and a more accurate estimate of compliance costs.

“If these regulations move forward as written, they will kill the industry’s momentum in making natural gas fuels a viable alternative to gasoline and diesel,” he said.

The CDFA oversees and regulates commercially sold motor vehicles, but some stakeholders believe the department is overreaching its jurisdiction by mandating a specific methane number. However, for natural gas to gain wide acceptance as an alternative vehicle fuel, the industry needs to have oversight and quality controls similar to those in place for gasoline and diesel.

The CDFA said that staff would consider the concerns raised at the meeting and would read all the comments submitted. The agency plans to open a 15-day comment period. If after review of those comments it decides to rework the proposed regulation, it would open a second 45-day comment period.

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