Oil companies may end up relying on environmentally questionable crop-based fuels.

By Aaron Cantu, Capital & Main

This story is produced by the award-winning journalism nonprofit Capital & Main and co-published here with permission.

Since 2020, two oil companies in Contra Costa County have assembled plans to convert their petroleum refineries to processing biomass instead. But residents and environmental groups are raising concerns that the plans could actually increase emissions and exacerbate the climate crisis, the opposite of what the state is setting out to do.

Gov. Gavin Newsom’s call for regulators to “accelerate refinery transitions away from petroleum to the production of clean fuels” was part of a larger effort to reduce climate pollution from California’s transportation sector, the largest source of emissions in the state.

And even within the California Air Resources Board (CARB) — the agency responsible for managing the state’s progress toward cutting greenhouse gas emissions — there’s uncertainty about how supply chains for biofuels may impact the environment, according to agency documents.

Phillips 66’s Rodeo Renewed refinery and Marathon’s facility in Martinez plan to produce renewable diesel from waste-based “feedstocks” such as tallow and grease, as well as fresher oils extracted from soybeans, corn and canola. Phillips 66 also has plans to make jet fuel from animal fats and vegetable oils.

In public statements, the industry and regulators have emphasized that the refineries would mostly use waste oils. But those supplies could be constrained by global demand for those waste products in the coming decades, meaning that biofuels refineries in California may increasingly have to rely on crop oils that would otherwise be used for food, according to forecasts from the agricultural industry and state regulators.

If poorly managed, plants grown for energy can wreck the climate, leading to a warmer atmosphere that induces extreme weather events. Nitrogen-based fertilizer produced with fossil fuels releases emissions when broken down in soil, and crops grown for fuel in Europe have gobbled up land, devastating forests in Asia and South America — leading the EU to reach an agreement banning products made from crops linked to deforestation. The Amazon, for example, is nearing the point of no return because of development and climate change.

To counter these impacts, CARB is considering limits on crop-based diesel fuel as part of an overhaul to reduce California’s emissions by 2030. But these reforms are opposed by biofuels refiners in the state, which are using public forums to dissuade regulators from implementing guardrails that experts say are critical. 

Biofuel Crop Demand Rising, Along With Risks

Renewable diesel is chemically the same as petroleum diesel but made from fats and oils. The market for it is supported by federal tax breaks as well as California’s Low Carbon Fuel Standard (LCFS) program, in which companies can generate tradable credits. Once completed, the converted Bay Area refineries could produce a combined 1.8 billion gallons of renewable diesel annually.

Across the country, companies are also investing in facilities to produce sustainable aviation fuel (SAF) made from biomass, and farmers anticipate huge increases in soybean production to meet this growing demand. Some oil majors have started purchasing exclusive rights to purchase these crop oils from suppliers.

In 2021, Phillips 66 invested in an  Iowa soy processing firm in return for the rights to purchase its entire production of crop oil for refining into fuel. Chevron, which has started producing renewable diesel at its refinery in El Segundo, is expecting to produce 100,000 gallons of renewable diesel and SAF by 2030, and purchased exclusive soybean oil rights from processors in Illinois and Louisiana for $600 million.

With more than a dozen renewable diesel and SAF refineries planned just in the U.S., some industry watchers worry about negative impacts for the climate and food supplies if other countries follow suit. The International Energy Agency projects a 22 percent rise in global biofuel use through 2027, driven mainly by demand for renewable diesel.

In a letter submitted to the state regarding California’s roadmap to zeroing out emissions by 2045, a 13-year former CARB regulator who oversaw the low carbon fuels program implored his former colleagues to “restrict and ultimately phase out the use of crop-based biofuels in California.”

“The use of crops such as corn and soy as feedstock to produce liquid biofuels is not a sustainable means of reducing [greenhouse gas] emissions and may actually increase emissions as compared to fossil fuels,” wrote James Duffy. “Promoting the use of these fuels is not in line with California’s role as a global leader in environmental policy.”

Those concerns are shared by Jeremy Martin, the director of fuels policy and senior scientist at the Union of Concerned Scientists. He and others authored a report, for the International Council on Clean Transportation, that predicts domestic biofuel demand will upend commodity supply chains, particularly U.S. exports of soybeans to China. 

“[China] could either switch to palm oil, which is the largest global source of low cost vegetable oil for people to eat, or they would have to get additional soybeans from other big producers, like Brazil or Argentina,” Martin told Capital & Main. These crops are associated with deforestation in the Amazon, Indonesia and Malaysia, where forests have long absorbed carbon dioxide. Without them, the planet’s ability to regulate temperatures is imperiled.

Refiners Oppose Limits to Crop-Based Fuels

Martin thinks California should put a cap on biofuels, and this year CARB is considering restrictions on crop-based fuels. But such limits are opposed by several of the state’s biofuels refiners.

In a letter to regulators, Marathon said that “capping crop-based feed stocks sends the wrong signal and will slow innovation in the agricultural sector.”

Chevron, while not overtly opposing a cap, wrote to regulators that current rules for analyzing the “carbon intensity” of crop fuels were sufficient.

Another company, World Energy, which is expanding its facility in southeast Los Angeles to scale up production of biomass jet fuel, downplayed concerns in a letter to regulators, questioning “cause and effect” relationships between biofuels and global emissions and food markets.

Phillips 66, did not answer a question from Capital & Main about whether it opposes a biofuels cap.

 Over Objections, County Greenlights Refineries

In appeals filed with Contra Costa County opposing the Bay Area biofuels refineries, community and environmental groups alleged that the county hadn’t adequately addressed potential climate harms from processing crop oils. They also noted a potential increase in local pollution because of processing changes requiring the refineries to periodically release gases to avoid pressure build up.

The county’s analysis, meanwhile, found that emissions and pollution would be lower than if the refineries were still processing petroleum.

To help make a decision on environmentalists’ appeals, county officials requested input from Richard Corey, then CARB’s executive director, and Rajinder Sahota, deputy executive officer for climate change and research.

Sahota told Capital & Main that she and Corey spoke to county officials “in the language of the [zero emissions vehicles] Executive Order on transitioning refineries to clean fuels.” In that order, Gov. Newsom called for an end to fossil fuel passenger cars by 2035 and heavy duty vehicles by 2045. CARB bolstered the order by approving the Advanced Clean Cars II rule last August.

Claudia Jimenez, a city councilmember in Richmond who opposes the refineries, found regulators’ explanations unsatisfying. In her view, the refineries are propping up carbon-intensive fuels when the state should be doubling down on renewable energy sources.

“I don’t think the solution to climate change is to convert fossil fuel refineries into biofuels, especially because the problem is also that we are going to compete with food for [crop] space to keep putting [fuel] in cars,” Jimenez said.

At a hearing before county supervisors on May 3, Corey described the refineries as part of a necessary interim stage before California can reach fuller electrification of vehicles.

“We’re going to be needing liquid fuels in some of these applications for quite some time,” he said. “The question is, for the legacy fleet, as well as those sectors that are particularly challenging to electrify, we still need to reduce [greenhouse gas] emissions.”

Corey also assured county supervisors that the state’s LCFS program does not incentivize palm oil — a particularly destructive feedstock — and that most renewable diesel is made from used cooking oil, tallow, corn oil and “relatively small” amounts of soybean and fish oil.

Shortly after Corey spoke, the five-person board rejected the appeals, allowing refinery plans to move forward.

Refinery Rules Not Strong Enough, Says Expert

But some of the facts that Corey mentioned in his comments may have been outdated. Even CARB has acknowledged that the share of soybean oil used in biofuel production is rapidly increasing nationwide, which will likely contribute to increased use in California of fresher crop oils compared to more limited waste oil supplies.

Biofuels producers can get more LCFS credits for using waste oil feedstocks, but CARB forecasts that waste supplies will steadily decline from now to 2045 while the use of crop-based feedstocks will increase over the same period.  

A Phillips 66 spokesperson told Capital & Main that the Rodeo refinery will rely on “waste oils, fats, greases and vegetable oils.” But CARB records show that the company has applied for LCFS credits thus far based only on making diesel from soy, canola and corn oils.

In an email to Capital & Main, Corey — who is now a partner at a lobbying firm, AJW Inc., that represents low carbon energy suppliers, including biofuels producers — explained that he views low carbon fuels as part of a broader set of solutions for hard-to-electrify sectors, including older trucks and aviation.

“I was clear that we need to move faster to drive down emissions and protect communities and that a single strategy was not sufficient and saw cleaner/low-carbon fuels as needing to be included in a multipronged strategy,” he wrote. 

Before voting to allow the refineries to go forward, the Contra Costa County supervisors voted to prohibit palm oil feedstocks, encourage refinery owners to use landfill waste as feedstocks when possible, and cap overall fuel production at the refineries.

Those rules are a good start and helpful in avoiding additional local pollution but must be expanded to state and federal levels, according to the Union of Concerned Scientists’ Jeremy Martin.

“Limiting individual facilities is not a substitute for limiting the total aggregate of vegetable oils used for fuel,” Martin wrote to Capital & Main.

Within a month, groups filed lawsuits against Phillips 66, Marathon and the county over the approvals. Phillips 66 already started processing biofuels at its refinery. A Marathon representative said the Martinez refinery will be fully operational by the end of 2023.

The U.N.’s IPCC report indicates that over the next 20 years, nations must cut emissions at an unprecedented rate to limit societal damage. The margin of error is slim to none, according to the Center for Biological Diversity’s John Fleming, whose organization is a party to the lawsuit.

“The state has taken the unfortunate position of ‘all of the above’ in terms of fuel sources to tackle the issue of transportation emissions,” Fleming wrote in an email. “Many biofuels being put forth will do little to address the climate and environmental justice crises.”

Copyright 2023 Capital & Main