by Jeff Baldino
What is RICP?
The Refinery Investment Credit Program (“RICP”) provisions of the California Low Carbon Fuel Standard (LCFS) (regulated under Title 17 CCR 95489(e)) allow refineries in California to generate credits by undertaking GHG reduction projects at their facilities. Although fuel pathways provide the primary avenue for credit generation within the LCFS, fuel producers can also generate credits with project-based crediting. The RICP allows refiners to generate LCFS credits through a variety of project types including use of renewable energy sources, conversion of combustion power sources to electricity, use of carbon capture and sequestration (CCS), and process improvement projects.
What RICP changes were proposed in the January 2024 rulemaking materials?
On December 19th, 2023, the California Air Resources Board (CARB) released proposed changes to the LCFS pursuant to the 2022 Scoping Plan update. These changes were subsequently updated on January 2nd, 2024. The public comment period lasted from January 5th, 2024 to February 20th, 2024 and the Public Hearing is slated for November 8th, 2024.
Below is a summary of changes proposed to the RICP:
- 2040 RICP Project Phase Out: Except for CCS projects, all RICP project types will be phased out by December 31st, 2040. The Initial Statement of Reasons note plans to phase out petroleum-based project crediting by 2040 because of the projected reduction in demand for petroleum-based fuels. Section 95489(e)(5)(B).
- Hydrogen Project Expansion: The current LCFS rule requires that hydrogen production facilities that supply hydrogen to refineries not co-located within the refinery only produce RICP credits via CCS projects. The proposed regulation states any hydrogen production facility providing hydrogen to a refinery can generate credits under any of the approved RICP project types. Section 95489(e)(1)(D).
- Minimum Emissions Requirements Apply to All Projects: The current LCFS rule requires minimum emissions specific to process improvement RICP projects. These projects must reduce emissions by at least 10,000 metric tons/year or 1 percent of the facility emissions total, whichever is less. Per the proposed regulation, this limit now applies to all RICP project types. Section 95489(e)(1)(J).
- Validation Requirement: The proposed regulation in section 95489(e)(4)(B), states that RICP projects must obtain a positive or qualified positive validation statement to receive CARB approval on applications. This differs from the current LCFS regulation, which only requires projects to complete an annual verification once the project has received initial CARB approval. Section 95489(e)(4)(B).
- Environmental Attribute Retirement: RICP now clarifies that any renewable or low-Carbon Intensity (CI) energy used to generate LCFS credits from RICP projects cannot generate Renewable Electricity Credits or other environmental attributes recognized or credited by any other jurisdiction or regulatory program. Section 95489(e)(1)(K).
- Joint Applicant Requirements: The proposed regulation requires a joint application when a third party is a stakeholder in a RICP project. Section 95489(e)(1)(I). In the following circumstances, a joint application between a refinery and a third party energy provider or carbon storage provider would now be required:
- When a project generates credits from low-CI process energy, or when renewable/low-CI electricity is produced by a third party that is delivered to a refinery or hydrogen production facility.
- When a third party supplies low-CI energy to multiple refineries; the third-party supplier must jointly apply for each project with each individual refinery.
- When a CCS project utilizes a third party to sequester carbon.
- Other Proposed Changes:
- The reporting platform for project reports has changed from the Alternative Fuels Portal (AFP) to the LCFS Reporting Tool and Credit Bank & Transfer System (LRT-CBTS). Section 95489(e)(3)(G).
- The proposed changes specify that the carbon captured in CCS projects must come from existing anthropogenic sources. Section 95489(e)(1)(D)(1).
- An official project report must be submitted either annually or quarterly. Annual reports must be submitted by April 30th each year. Section 95489(e)(5).
What is the future of the RICP Program?
Since its inception, the RICP program has provided a unique opportunity for refiners to reduce up to 10 percent of their LCFS deficits through project crediting. However, RICP projects have not been as widely utilized as fuel pathway projects. The few approved projects listed on CARB’s website can be viewed here.
CARB has made its intentions clear through existing and proposed regulatory action how it views the future of petroleum fuels in California. Additionally, the proposed changes to RICP impose new requirements on the scope of the program (i.e., proposing successful validation for future applications). EcoCira expects to gain more clarity on the future of the program after the November 8th, 2024 public hearing, assuming it remains on the schedule.
Notwithstanding the uncertainty around future rulemaking (new bill on LCFS timing here), we still see opportunities to take advantage of the RICP and generate much needed LCFS credits over the course of the next 15 years. We recommend that applications for projects in development be submitted as soon as possible to account for delays in the application approval process. EcoCira has direct experience working on and evaluating RICP projects and can help navigate the application process and subsequent program development to streamline your project’s credit generating potential.