Bill Summary – FastDemocracy

HOUSE BILL NO. 5083
     October 03, 2023, Introduced by Reps. Andrews, Conlin, Brixie, Hoskins, Byrnes, Rheingans,
       Dievendorf, Arbit, Price, Hill, Churches, Puri and Pohutsky and referred to the Committee on
       Government Operations.
          A bill to establish a standard to reduce the carbon intensity
    of transportation fuels; to establish a market for trading carbon
    intensity credits; and to provide for the powers and duties of
    state and local governmental entities.
                      THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
       Sec. 1. As used in this act:
       (a) "Clean fuel" means a transportation fuel that has a carbon
 intensity level that is below the current clean fuels standard.
       (b) "Credit" means a measure, in metric tons of carbon dioxide
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 equivalent, of the amount by which the carbon intensity of a clean
 fuel provider's transportation fuel volume produced or imported for
 use in this state is exceeded by the carbon intensity of the
 current clean fuels standard.
       (c) "Credit generator" means a person that produces or imports
 a clean fuel for use in this state, which in the case of
 electricity used as a transportation fuel could include, but is not
 limited to, automakers, electric charging providers, electric
 utilities, and electric vehicle fleet operators.
       (d) "Deficit" means a measure, in metric tons of carbon
 dioxide equivalent, of the degree to which the carbon intensity of
 a fuel provider's transportation fuel volume produced or imported
 for use in this state exceeds the carbon intensity of the
 applicable annual clean fuels standard.
       (e) "Deficit generator" means a fuel provider that generates
 deficits and that first produces or imports a transportation fuel
 for use in this state.
       (f) "Department" means the department of environment, Great
 Lakes, and energy.
       (g) "Fuel pathway" means a detailed description of all stages
 of a transportation fuel's production and use, including
 extraction, processing, transportation, distribution, and
 combustion or use by an end user.
       (h) "Fuel provider" means a person that produces or imports a
 transportation fuel for use in this state.
       (i) "Greenhouse gas" means carbon dioxide, methane, nitrous
 oxide, hydrofluorocarbons, perfluorocarbons, or sulfur
 hexafluoride.
       (j) "GREET model" means the Argonne National Laboratory's most
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 recent Greenhouse Gases, Regulated Emissions, and Energy Use in
 Transportation model.
       (k) "MDOT" means the state transportation department.
       (l) "Motor vehicle" means an automobile, motorcycle, truck,
 train, light rail vehicle, ship, aircraft, forklift, or other road
 or nonroad vehicle.
       (m) "Office" means the Michigan economic development
 corporation's office of future mobility and electrification.
       (n) "Person" means an individual or a partnership,
 corporation, limited liability company, association, governmental
 entity, or other legal entity.
       (o) "Petroleum-only portion of transportation fuels" means the
 component of gasoline or diesel fuel before blending with ethanol,
 biodiesel, biofuel, or other low-carbon-intensity fuel.
       (p) "Transportation fuel" means fuel, including, but not
 limited to, electricity, gasoline, diesel, ethanol, biodiesel,
 renewable diesel, propane, renewable propane, natural gas,
 renewable natural gas, hydrogen, aviation fuel, and biomethane,
 that is both of the following:
       (i) Blended, sold, supplied, offered for sale, and used to
 operate or propel a motor vehicle.
       (ii) Compliant with applicable standards, specifications, and
 testing requirements under this act and rules promulgated under
 this act.
       Sec. 3. The department shall calculate the baseline carbon
 intensity of the petroleum-only portion of all transportation fuel
 produced or imported in 2019 for use in this state by doing both of
 the following:
       (a) Reviewing and considering the best available applicable
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 scientific data and calculations.
       (b) Using a life-cycle emissions performance-based approach
 that is technology and feedstock neutral.
       Sec. 5. (1) Beginning December 31, 2035, as an overall clean
 fuels standard, the carbon intensity of all transportation fuel
 produced or imported for use in this state shall be reduced to and
 maintained at levels at least 35% below the 2019 baseline level, as
 determined under section 3. The carbon intensity of the overall
 clean fuels standard is subject to further reduction by the
 department based on all of the following:
       (a) The cost of compliance.
       (b) Advances in technology available to fuel providers to
 achieve the further reduction.
       (c) The need to maintain fuel quality and availability.
       (d) The goals of the department's MI Healthy Climate Plan.
       (2) The department, in consultation with MDOT, shall establish
 a schedule of annual clean fuels standards to progressively meet
 the overall clean fuels standard. In establishing the schedule, the
 department shall consider the cost of compliance, the technologies
 available to fuel providers to achieve the annual standards, and
 the need to maintain fuel quality and availability.
       (3) The department shall develop a mechanism that
 automatically increases the stringency of the schedule of annual
 clean fuels standards if there is a sustained oversupply of credits
 for 2 years.
       (4) The department may, by rule, do both of the following:
       (a) Increase the stringency of the 2035 carbon intensity
 reduction target and intermediate annual reduction targets.
       (b) Set clean fuel standards for 2040 and 2050.
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       Sec. 7. (1) The department shall establish a process to review
 fuel pathways submitted by credit generators. Fuel pathways shall
 be calculated using the GREET model. The fuel pathway review
 process shall meet all of the following requirements:
       (a) Be consistent for all fuel types.
       (b) Be science- and engineering-based.
       (c) Reflect differences in motor vehicle fuel efficiency and
 drive trains.
       (2) The department shall consult with MDOT and the office to
 determine fuel pathways and may coordinate with third-party
 entities or other states to review and approve pathways.
       Sec. 9. (1) The department shall establish a fair and
 reasonable program for tradable credits and deficits. The
 generation of credits shall use a life-cycle emissions performance-
 based approach that is technology and feedstock neutral to achieve
 fuel decarbonization. The program shall include the following:
       (a) A market mechanism that allows credits to be traded or
 banked for future use.
       (b) Transaction fees associated with the credit market that
 are paid primarily by deficit generators to cover the
 administrative costs of the program.
       (c) Procedures to verify the validity of credits and deficits.
       (d) The ability to carry over up to 5% of deficits each year
 if credits are unavailable under section 11.
       (2) The department shall allow the generation of credits
 associated with the clean fuel or infrastructure that existed
 before the effective date of this section or the start date of
 program requirements.
       (3) Aviation fuels are exempt from the clean fuels standard.
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 However, sustainable aviation fuel is eligible to generate credits
 on an opt-in basis.
       Sec. 11. (1) A fuel provider that is a deficit generator
 during a year shall eliminate the deficit by doing either or both
 of the following:
       (a) Producing or importing transportation fuels whose carbon
 intensity is at or below the level of that year's annual clean
 fuels standard.
       (b) Purchasing credits to offset the deficit.
       (2) A fuel provider that violates subsection (1) may be
 ordered to pay a civil fine of 200% of the value of the credits
 needed to offset the violation. The civil violation may be
 prosecuted by the prosecutor of the county in which the violation
 occurred or by the attorney general.
       Sec. 13. The department shall collaborate with MDOT and the
 office to develop a compliance reporting process, including forms,
 for credit generators and deficit generators. The department shall
 regularly post on the department's website data on deficit and
 credit generation and credit prices.
       Sec. 15. (1) By 1 year after the effective date of this act,
 the department shall promulgate rules under the administrative
 procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, to
 implement this act.
       (2) In developing the rules, the department shall do all of
 the following:
       (a) Consult with MDOT and the office.
       (b) Solicit input from stakeholders, including, but not
 limited to, fuel providers; consumers; rural, urban, and tribal
 communities; agricultural organizations; environmental and
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 environmental justice organizations; and technology providers,
 through a task force, working groups, public meetings, and other
 means.
       (c) Endeavor to do all of the following:
       (i) Support the growth and creation of high-paying jobs in the
 clean fuels and automotive industries in this state.
       (ii) Ensure transparency and fair competition.
       (iii) Complement and further both of the following:
       (A) Existing state and federal fuel, transit and mobility,
 transportation decarbonization, infrastructure, and greenhouse gas
 emissions policies and programs.
       (B) Existing efforts by the agricultural sector to increase
 the adoption of practices that improve soil health and water
 quality.
       (iv) Recognize voluntary farm emissions reductions that
 contribute to the reduced carbon intensity of fuels by allowing
 credit generators to choose between a credit premium or
 individualized farm-level carbon intensity scoring for approved
 sustainable agricultural practices.
       (v) Until farm-specific practices are added to the GREET model
 full life-cycle accounting, allow an additional credit premium for
 cropland-derived biofuels produced on either of the following:
       (A) Acreages that use soil-health farming practices and
 fertilizer best management practices provided by the Michigan
 agriculture environmental assurance program, soil conservation
 staff, or standards from the United States Department of
 Agriculture.
       (B) Acreages that use continuous living cover cropping systems
 or other practices that show an increase in carbon capture compared
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 to traditional cropping methods that can be proven by best
 available research and verified by the department or a land grant
 university. The department shall develop a methodology for
 calculating, monitoring, and third-party auditing and verifying of
 on-farm practices to ensure accuracy of the carbon capture results.
       (vi) Identify safeguards and incentives to protect
 biodiversity, reduce potential land use impacts, consider
 unintended consequences at scale, safeguard customer privacy, and
 promote equity.
       (vii) Require an agricultural livestock production facility
 that participates in the clean fuel standard to provide to the
 department periodic certification that the facility has not and
 will not increase the number of animal units at the facility for
 the sole or primary purpose of producing or increasing the
 production of biogas that is derived from the anaerobic digestion
 of manure at the facility.
       (d) Develop procedures to allow credit generators to generate
 credits for electric vehicle charging that occurs at residences.
 The department shall set a goal for the percent of credit revenue
 generated under this subdivision to be spent in support of
 transportation electrification and transportation emission
 reduction programs for the primary benefit of disadvantaged
 communities, low-income communities, or rural communities. The
 department shall develop projects and identify goals under this
 subdivision in consultation with credit generators, communities,
 community leaders, and environmental justice advocates, including
 members of the Michigan advisory council on environmental justice.
       Sec. 17. By 2 years after the effective date of rules
 promulgated under section 15, the department shall submit a report
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 detailing program implementation to the senate and house committees
 responsible for transportation, energy, and natural resources
 legislation. The department shall make summary information on the
 program available to the public.
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