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News Update
- LCFS applications persist despite potential avoided methane crediting phase out. US Venture is seeking a Tier 2 fuel pathway certification for biomethane from dairy manure at the Yellow Jacket Swiss Valley RNG project in New York despite the potential changes to avoided methane crediting announced by CARB in February. During the February workshop, CARB staff discussed transitioning away from fossil fuel to clean fuel production, specifically wanting to phase out avoided methane crediting and the use of RNG as a primary fuel by 2040. With US Venture being the latest to apply, market participants wonder if entities will continue to register biomethane projects as potential amendments to the program may be implemented next year.
- Oregon court denies HF Sinclair bid for 2.5 million allowances. Oregon judge Benjamin Souede held a hearing on March 27th regarding HF Sinclair's bid for the Oregon Department of Environmental Quality (DEQ) to issue the company up to 2.5mn allowances towards the state’s Climate Protection Program. HF Sinclair threatened to pull out of the Oregon fuel market if it did not receive the allowances, saying it would face billions of dollars in penalties for non-compliance despite producing fuel for Oregon’s cap-and-trade program in Washington. The judge stated that the court’s ruling would not cause HF Sinclair any irreparable harm and any losses incurred could be rectified with money damages if necessary. HF Sinclair’s exit from the Oregon market would remove approximately 13% of Oregon’s total supply and spike prices. The company has yet to announce any actions taken resulting from the ruling.
- Shell to receive 2.5 million allowances in wake of Oregon court ruling. The DEQ is set to give Shell up to 2.5 million credits related to the fuels imported into Oregon from HF Sinclair’s Puget Sound Refinery in Washington. The DEQ bases its credit distribution on fuel imports over a three-year period ending two years before the year in question. HF Sinclair didn’t take ownership of Oregon imports from the refinery until May 2022, leading to the DEQ to grant Shell the credits rather than HF Sinclair despite Shell selling the refinery to HF Sinclair in 2021.
- California passes bill to cap gas refinery profits. Lawmakers in California passed legislation SBX1-2 which sets a maximum gross refining margin for in-state gasoline refiners and allows penalties to be determined for refineries that exceed the margin cap unless granted an exemption by the California Energy Commission. The bill also allows the commission the choice to not impose said penalties if it would result in higher gasoline prices for consumers despite high prices reducing demand for gasoline, which generates nearly 80% of new LCFS deficits. SBX1-2 was passed by a vote of 52-19 and will move to Governor Newson for final signature.
- EPA grants California program zero-emission truck rule waiver. Manufacturers selling commercial trucks to rail yards, ports, municipal fleets, and large businesses in California will be required to offer an increasing percentage of electric or other zero-emission options under the state's Advanced Clean Trucks rule. The US Environmental Protection Agency (EPA) granted a waiver from the federal Clean Air Act authorizing the program which will require almost half of the vehicles sold in-state to be zero-emission by 2035.
Market Update
- On average, California LCFS traded at $73.00 in February, which is ~2.8% higher than the February average of $71.00.
- CARB reported 252 transactions in March, a 56.5% increase from the 161 transfers reported in February. The traded volume was equal to 2,702,000 credits, more than doubling February’s traded volume of 1,293,000 credits. March weighted-average price was $73, whereas the reported average spot price was 8.6% lower and equal to $67.23.
- California LCFS credits traded higher in March, starting the month at $65.00 before reaching the monthly high of $71.50 on the 14th. Prices inched down to $69.50 less than a week later before settling for the month.
- Oregon LCFS credits traded higher over the month of March, starting the month at $122.00 and increasing by approximately $1/week before the last week of March where they jumped by $4, marking a new two-year high of $128.00 before closing out the month.
- DEQ reported a new transfer volume record of an estimated 346,000 metric tons of credits moved in March, more than twice the volume moved in March 2022 and 5.1% higher than the previous transfer record set in December 2022.
- The LCFS maximum credit price will be $253.53/t. as of 1 June 2023, based on the new CARB calculation, up from the 2022 maximum of $239.18/t. LCFS maximum credit prices are determined by a $200/t cap in 2016 dollars adjusted by a consumer price index.
- While the market remains oversupplied fundamental with the bank of LCFS at its highest levels in program history, prices did rebound off lows of $59 earlier this year to $80 in mid-April given the regulatory push to increase the pace of reductions in the program. Though likely not to be finalized until calendar year 2024, the market is factoring this in to a slight extent.
LCFS Schedule
- April 28th, 2023: California LCFS Q4 2022 Data Release
- June 30th, 2023: California LCFS Q1 2023 Reporting Deadline
- July 31st, 2023: California LCFS Q1 2023 Data Release
LCFS Credit & Futures Pricing
Credit Prices as of April 14th, 2023: |
Futures Prices as of April 14th, 2023: |
- California - Spot Delivery: $ 71.50
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- Oregon - Spot Delivery: $ 123.00
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LCFS Cost for Gasoline and Diesel
California, as of April 14th, 2023:
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Oregon, as of April 14th, 2023:
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- Carbob (No Cl ethanol) - Vintage 2022: 10.82 cents per USG
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- E10 gasoline - Vintage 2022: 9.82 cents per USG
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- Carbob (79.9 Cl ethanol) - Vintage 2022: 10.27 cents per USG
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- B5 diesel – Vintage 2022: 11.19 cents per USG
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Monthly LCFS Credit Transfer Activity for California
Time
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Transfers
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Total Volume
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Avg $/credit
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23-Mar
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252
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2,702,000
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$73
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23-Feb
|
161
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1,293,000
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$71
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23-Jan
|
470
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4,564,000
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$81
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22-Dec
|
292
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3,001,000
|
$86
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22-Nov
|
181
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2,379,000
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$81
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22-Oct
|
555
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5,005,000
|
$106
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22-Sep
|
179
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1,759,000
|
$102
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22-Aug
|
153
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1,624,000
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$97
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22- Jul
|
439
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3,680,000
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$117
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22-Jun
|
133
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1,268,000
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$113
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22-May
|
119
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861,000
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$125
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22-Apr
|
468
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4,584,000
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$153
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22-Mar
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280
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3,301,000
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$158
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CY 2022
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3,137
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30,641,000
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$125
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CY 2021
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2,664
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25,279,000
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$187
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CY 2020
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2,461
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21,728,000
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$199
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CY 2019
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1,656
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14,146,000
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$192
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CY 2018
|
1725
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13,334,000
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$160
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CY 2017
|
1226
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8,875,000
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$89
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CY 2016
|
929
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5,343,000
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$101
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CY 2015
|
578
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2,852,000
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$62
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CY 2014
|
304
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1,667,000
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$31
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CY 2013
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202
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887,000
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$55
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Source: https://ww2.arb.ca.gov/resources/documents/monthly-lcfs-credit-transfer-activity-reports
Figure 1. California LCFS Prompt USD/mt April 2022 - Present
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2022 Average Daily Price: $ 98.35
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2023 Average Daily Price: $ 66.76
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2022 Highest Daily Price: $ 153.50
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2023 Highest Daily Price: $ 80.00
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(January 6th, 2022)
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(April 13th, 2023)
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Figure 2. California Monthly LCFS Credit Price and Transaction Volume as Reported by ARB
Figure 3. Oregon LCFS Prompt USD/mt April 2022 – Present
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2022 Average Daily Price: $ 117.85
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2023 Average Daily Price: $ 123.76
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2022 Highest Daily Price: $ 126.50
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2023 Highest Daily Price: $ 130.00
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(February 17th, 2022)
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(April 13th, 2023)
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Questions? Contact our team for more information: environmental@aegis-hedging.com
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