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Comment 1 for Public Workshop to Discuss Allowance Allocation to Refineries (aug-13-refinery-ws) - 1st Workshop.


First Name: David
Last Name: Campbell
Email Address: davidc@sjr.com
Affiliation: SAN JOAQUIN REFINING CO., INC.

Subject: Cap & Trade Workshop on Refineries and Related Industries
Comment:
See attachment.
Ecofys Refineries – Preliminary Work Product dated 8/20/12, page 45
lists San Joaquin Refining as a potentially atypical refinery.
Solomon Associates Complexity-Weighted Barrels Methodology for
California Refineries (CA-CWB) for CARB Refinery Workshop August
13, 2013, Slide 13 states: “Atypical” refiners may be handled
separately
•	Extremely small sizes – SJR refines approximately 14,000 bbls of
crude/CD
•	Performing predominantly specialized functions (such as bitumen
production or lube oil manufacture – SJR refines only Kern River
crude with an API Gravity of 12-14.  Very heavy crude that yields
50% of every barrel as asphalt.  The daily refinery yield is
approximately 6,000 bbls/CD for asphalt and 3,000 bbls/CD lubes.
•	Atypical product slate (such as <40% light products including
motor gasoline, aviation gasoline, kerosene, and diesel/heating
oil) – SJR does not refine any motor gasoline, aviation gasoline,
or kerosene.  SJR does manufacture Ultra Low CARB diesel at
approximately 1,700 bbls/CD.  This computes to about 12% diesel
yield from daily crude production of 14,000 bbls/CD.
SJR has been recognized by both CARB and Federal EPA as a small
independent refiner.  For this reason, CARB Low Carbon Fuel
Regulations (LCFS) have provided that small refiners may have a
longer period of time to meet the LCFS Regulations at the onset of
the current regulations.  Also, CARB Mandatory GHG Reporting
Regulations have recognized SJR and others as small refiners and
have been allowed to analyze our gases at a less frequent rate as
the large refiners.  Additionally, CARB LCFS Regulations are being
proposed to the CARB Board in October providing for small refiners
who have Low Complexity and Low Energy-Use to receive different
Carbon Intensity values within the LCFS Program.
The Ecofys Report was developed as part of a larger assignment by
ARB to a consortium of Ecofys and UC Berkeley.   Ecofys shows the
refinery as a potential atypical refinery.  Solomon Associates with
over 30 years as a leader in Benchmarking and Performance
Improvement Services is recognized by ARB as experts in this field
also provide that “Atypical” refiners may be handled separately. 
And yet, the CARB Cap & Trade Refiners and Related Industries staff
 makes no offer to “atypical” refiners to help reduce the burden of
these proposed regulations.
The California Greenhouse Gas Cap & Trade Program Final Regulation
went into effect January 1, 2012.  The program includes three
compliance periods in which the covered entities need to balance
emissions with allowances.  The first compliance period started on
January 1, 2013 and ends in December, 2014.  For the first
compliance period, the amount of free allocation to refineries is
determined using a product based benchmark.  In the second
compliance period for years 2015-2017, the product-based benchmark 
will be replaced by a uniform complexity-adjusted approach for all
refineries known as the Carbon Dioxide Weighted Tonne (CWT).  The
CWT contains multiplying factors for each type of unit within a
refinery developed by Solomon Associates.  In order to comply with
the second compliance period CWT requirements, SJR during 2012, at
a great expense for a small independent refiner, replaced many of
the metering instruments in each of its units so that the measuring
instruments could measure liquid densities of certain feedstock’s
and production products by January 1, 2013 as required by current
regulations.  Additionally, using the CWT equations, SJR made
certain business decisions for future years through the second
compliance period.  We purchased nearly $1.5 MM worth of allowances
at the CARB Auctions.
The CWT and CWB Factors were provided to CARB by Solomon
Associates.  Solomon Associates developed the CWB approach in 2008.
 CARB had the CWT and CWB methodologies in hand while work shopping
the Cap & Trade Program since its onset.  CARB chose the CWT over
the CWB to put into the current regulations for the second
compliance period.
Now CARB wants to back pedal and change the second compliance
period to a different basis for allowance allocation to the
Complexity Weighted Barrel (CWB) approach instead of the CWT
approach.  With this proposed change to CWB their will also be an
increase in the multiplying factor used.  This in turn will
increase the amount of future auction allowances purchased by SJR. 
Let alone that the measuring instrument upgrades completed in 2012
to meet liquid density criteria for the CWT method will no longer
be needed to compute barrels of feedstock/product.
SJR suggests to the CARB staff that they communicate with Ecofys
and Solomon Associates to determine how the small refiners with low
complexity, low energy use, heavy asphalt production, lube
production and low fuels production have been treated in the EU
countries.  SJR and other small refiners should not be treated the
same as the large refiners in Cap & Trade allowance allocation.  As
I indicated above, this is not a new precedent.  CARB has
recognized small refiners in the past while promulgating
regulations.

Attachment: www.arb.ca.gov/lists/com-attach/2-aug-13-refinery-ws-UDFWJFYuBCcHaAFi.docx

Original File Name: Atypical Refinery - SJR.docx

Date and Time Comment Was Submitted: 2013-08-20 11:23:06



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