SB1556sam001 103RD GENERAL ASSEMBLY

Sen. David Koehler

Filed: 1/19/2024

10300SB1556sam001 LRB103 26950 JDS 68557 a

AMENDMENT TO SENATE BILL 1556

AMENDMENT NO. ______. Amend Senate Bill 1556 by replacing everything after the enacting clause with the following:

"Section 1. Short title. This Act may be cited as the Clean Transportation Standard Act.

Section 5. Findings. The General Assembly finds that:

(1) The transportation sector in this State is a leading source of criteria air pollutants and greenhouse gas emissions, which collectively endanger public health and welfare by causing and contributing to increased air pollution and climate change.

(2) Shifting from petroleum-based transportation fuels to alternative fuels has the potential to significantly reduce transportation emissions of air pollutants and greenhouse gases and is recommended by the Intergovernmental Panel on Climate Change as an important pathway for holding global warming at 1.5 degrees Celsius. A clean transportation standard would promote innovation in and production and use of nonpetroleum fuels that reduce vehicle-related and fuel-related air pollution that endangers public health and welfare and disproportionately impacts disadvantaged communities.

(3) Credits generated through the use of clean fuel under this Act will promote innovation and investment in clean fuels.

Section 10. Definitions. As used in this Act:

"Agency" means the Environmental Protection Agency.

"Aggregator" or "credit aggregator" means a person who registers to participate in the clean transportation standard program on behalf of one or more credit generators to facilitate credit generation and to trade credits.

"Aviation fuel" means a fuel suitably blended to be used in aviation engines.

"Backstop aggregator" means a qualified nonprofit entity approved by the Agency to aggregate credits for electricity used as a transportation fuel when those credits would not otherwise be generated.

"Board" means the Pollution Control Board.

"Carbon intensity" means the amount of lifecycle greenhouse gas emissions per unit expressed in grams of carbon dioxide equivalent per megajoule.

"Clean fuel" means a transportation fuel that is domestically produced and has a carbon intensity below the clean transportation standard carbon intensity standard in a given year.

"Clean transportation standard" means the standard adopted by the Board under Section 15 for the reduction, on average, of lifecycle carbon intensity of fuels used for on-road transportation. If there is an industry-accepted standard for calculating the carbon intensity of different modes of transportation, such as off-road, light rail, and other forms of mass transportation, the Board shall adopt that standard.

"Consumer Price Index for All Urban Consumers" means a measure that examines the changes in the price of a basket of goods and services purchased by urban consumers, and is published by the U.S. Bureau of Labor Statistics.

"Credit" means a unit of measure generated when clean fuel is produced, imported, or dispensed for use in this State, such that one credit is equal to one metric ton of carbon dioxide equivalent.

"Credit generator" means a fuel reporting entity that generates a credit in the clean transportation standard.

"Deficit" means a measure 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 transportation standard, expressed in metric tons of carbon dioxide equivalent.

"Deficit generator" means a fuel reporting entity that generates a deficit in the clean transportation standard.

"Fuel" means a transportation fuel that is used directly in a vehicle for transportation purposes without requiring additional chemical or physical processing.

"Fuel pathway" means a detailed description of all stages of a transportation fuel's production and use, including feedstock growth, extraction, processing, transportation, distribution, and combustion or use by an end user.

"Lifecycle carbon intensity" means the quantity of greenhouse gas emissions per unit of energy, expressed in carbon dioxide equivalent per megajoule, emitted by the fuel, including both direct and indirect sources, as calculated annually by the Agency under subsection (b) of Section 20 using the methods described under Section 30.

"Military tactical vehicle" means a motor vehicle owned by the U.S. Department of Defense or the U.S. military services and used in combat, combat support, combat service support, tactical or relief operations, or training for such operations.

"Petroleum-only portion" means the component of gasoline or diesel fuel before blending with ethanol, biodiesel, biofuel, or other low-carbon-intensity fuel.

"Producer" means:

(1) with respect to any liquid fuel, hydrogen fuel, and renewable propane, the person who makes the fuel;

(2) with respect to any biomethane, the person who refines, treats, or otherwise processes biogas into biomethane;

(3) with respect to electricity, the person who is the direct provider of electricity; or

(4) with respect to other types of fuel, a person deemed appropriate by the Agency.

"Provider" includes, but is not limited to, a refiner, producer, or importer of a transportation fuel and a direct provider of electricity being used as a fuel source for transportation, including, but not limited to, electric vehicle charging service providers, electric utilities, and electric vehicle fleet operators. For the purposes of the clean transportation standard, "provider" does not include the owner or operator of a residential charging station or the owner or operator of a commercial property with on-site charging stations independent of the primary function of the business.

"Regulated entity" means any entity, whether a credit generator or deficit generator, that has registered, on a mandatory or permissive basis, to participate in the clean transportation standard.

"Sustainable aviation fuel" means an aviation fuel with a carbon intensity sufficient to generate credits under the clean transportation standard upon its production or supply.

"Tactical support equipment" means equipment using a portable engine, including turbines, that meets military specifications, is owned by the U.S. Department of Defense or the U.S. military services or its allies, and is used in combat, combat support, combat service support, tactical or relief operations, or training for such operations. "Tactical support equipment" includes, but is not limited to, engines associated with portable generators, aircraft start carts, heaters and lighting carts.

Section 15. Rulemaking and baseline calculations for clean transportation standard.

(a) To the extent allowed by federal law, within 24 months after the effective date of this Act, the Agency shall propose and the Board shall adopt rules establishing a clean transportation standard in order to reduce, within 10 years of the adoption of the Agency's rules by the Board, the lifecycle carbon intensity of fuels for the ground transportation sector by 20% below the 2019 baseline level as calculated under this Section. The rules proposed and adopted shall be subject to public notice and comment under the Illinois Administrative Procedure Act. The Board may recommend to the General Assembly reductions to the clean transportation standard below those adopted in accordance with this Act, using factors, including, but not limited to, advances in clean fuel technology. The rules adopted by the Board under this Section shall include fees for the registration of providers to offset the costs incurred by the Board and the Agency that are associated with implementing the clean transportation standard. These fees shall be used only in connection with the administration of the program and may be levied differently based on whether a registered entity is a credit generator or deficit generator. Except where otherwise provided in this Act, the Agency shall consider rules that are harmonized, to the extent practicable, with the regulatory standards, exemptions, reporting obligations, and other clean transportation standard compliance requirements and methods for credit generation of other states that have adopted low-carbon fuel standards or similar greenhouse gas emissions requirements applicable specifically to transportation fuels.

(b) The Agency shall calculate the baseline carbon intensities of the petroleum-only portion of all transportation fuels produced or imported in 2019 for use in this State by:

(1) reviewing and considering the best available applicable scientific data and calculations; and

(2) using a lifecycle emissions, performance-based approach that is technology-and-feedstock neutral.

Section 20. Contents of clean transportation standard. The clean transportation standard adopted by the Board, by rule, shall:

(1) apply to all providers in the State;

(2) be measured based on a lifecycle carbon intensity that shall be calculated annually by the Agency in accordance with Section 30;

(3) recognize voluntary farm emissions reductions that contribute to the reduced carbon intensity of fuels by allowing credit generators to use individualized farm-level carbon intensity scoring for approved sustainable agricultural practices. The Agency shall, for the purposes of determining individualized farm-level carbon intensity scoring, use the GREET model's Feedstock Carbon Intensity Calculator (FD-CIC);

(4) take into consideration the low-carbon clean transportation standards that are pending or have been adopted in other states;

(5) include a credit price cap to be determined by the Agency and confirmed by the Board to contain costs if the fuel supply forecasts determine that not enough credits will be available. The price cap shall be adjusted annually by the rate of inflation as measured by the most recently available 12 months of the Consumer Price index for All Urban Consumers. The price cap shall be published on the first Monday of a month to be determined by the Agency, and the cap shall go into effect the first Monday of the second successive month following publication;

(6) contain a structure for compliance that conforms with the marketplace system described in Section 25, including, but not limited to, details, such as:

(A) methods for assigning compliance obligations and methods for tracking tradable credits;

(B) mechanisms that allow credits to be traded, transferred, sold, and banked for future compliance periods;

(C) mechanisms that provide for the creation of a list of accepted credit transactions and a list of prohibited forms of credit transactions, which may include trades involving, related to, or associated with any of the following:

(i) any manipulative or deceptive device;

(ii) a corner or an attempt to corner the market for credits;

(iii) fraud or an attempt to defraud any other entity;

(iv) false, misleading, or inaccurate reports concerning information or conditions that affect or tend to affect the price of a credit; and

(v) applications, reports, statements, or documents required to be filed under this Act that are false or misleading with respect to a material fact or that omit a material fact necessary to make the contents therein not misleading;

(C) procedures for verifying the validity of credits and deficits generated under the clean transportation standard;

(D) mechanisms by which persons associated with the supply chains of transportation fuels that are used for purposes that are exempt from the clean transportation standard described in Section 40 and persons that are associated with the supply chains of transportation fuels and will generate credits may register with the Agency to participate in the clean transportation standard program; and

(E) an administrative procedure by which a regulated entity may contest the Board's or Agency's calculation prior to the levying of a penalty for failure to remedy a given deficit;

(F) procedures that will allow the Agency to cancel or reverse (i) a credit transfer that is determined to be a prohibited transaction under items (i) through (v) of subparagraph (B) or (ii) any other prohibited transaction as determined by the Board in rulemaking;

(7) contain a program review procedure whereby the Board or Agency shall solicit feedback from and annually consult with representatives from stakeholder groups, including representatives from the fuel production industry, the transportation industry, the agricultural industry, environmental advocacy organizations, labor organizations, representatives from impacted environmental justice communities, as defined in Section 801-10 of the Illinois Finance Authority Act, and representatives from related State agencies; the substance of the annual consultations shall include, but may not limited to, a review of the economic impact of the clean transportation standard, whether the clean transportation standard is adhering to the established carbon intensity reduction goals, the health impact of the emissions reductions on disadvantaged communities, and whether access to transportation has been affected as a result of the implementation of the clean transportation standard;

(8) include annual carbon intensity reduction standards that are to be met by regulated entities and that result in the attainment of carbon intensity reduction targets set by the Board;

(9) maximize benefits to the environment and natural resources and develop safeguards and incentives to protect natural lands and enhance environmental integrity, including biodiversity;

(10) aim to support, through credit generation or other financial means, voluntary farmer-led efforts to adopt agricultural practices that benefit soil health and water quality;

(11) support equitable transportation electrification that benefits all communities and is powered primarily with low-carbon and carbon-free electricity;

(12) seek to improve air quality and public health, targeting communities that bear a disproportionate health burden from transportation pollution;

(13) establish, in consultation with the Department of Agriculture and the Department of Transportation, a procedure for determining fuel pathways that:

(A) is consistent for all fuel types;

(B) is based on science and engineering;

(C) reflects differences in vehicle fuel efficiency and drivetrains; and

(D) accounts for any on-site additional energy use by a carbon capture technology employed in the fuel production process, including, but not limited to, generation, distillation, and compression;

(14) recognize that farmers who can demonstrate use of production methods that lower the carbon intensity of their commodities shall be compensated a fair market value that is, at minimum, commensurate with costs associated with those low-carbon production methods or shall be provided a fair share of the increased market value of the end-use product that their commodity is used to produce. Compensation may come in a variety of forms, including, but not limited to, practice-based incentive payments, outcome-based incentive payments, price premiums, or other forms of payment. The Agency shall also protect farm data by ensuring farmer ownership of data for a specific amount of time or negotiated on an annual basis;

(15) contain mechanisms to excuse excess emissions from enforcement action if such excess emissions are unavoidable. The rules shall specify the criteria and procedures for the Agency to determine whether a period of excess emissions is excusable;

(16) include mechanisms by which producers who would be eligible to generate credits from electricity used as transportation fuel may assign their right to generate credits to an aggregator, and include mechanisms by which a backstop aggregator may register with the program to generate credits if an electric utility opts out of the program; and

(17) provide indirect accounting mechanisms such as book-and-claim or mass-balancing for clean fuels entering fungible supply systems that can access this State.

Section 25. Credit market; verification and data privacy; compliance and penalties.

(a) The clean transportation standard adopted by the Board shall take the form of a credit marketplace with the following structure. The marketplace shall consist of a system of credits and deficits monitored by the Agency. The Agency shall compile a list of fuel pathways that producers and providers may use to generate credits. Producers and providers seeking to be credit generators must register with the Agency and attest to the transportation fuels they produce, import, or dispense in the State in order to qualify to generate credits. Each producer or importer of any amount of a transportation fuel that is ineligible to generate credits consistent with the requirements of this Act must register and comply with the program. Fuels that are registered with the program must have a dedicated, verifiable fuel pathway with a carbon intensity score measurable by software described in Section 30 and assigned a unique identifier by the Agency. Providers reaching or exceeding the required reduction of lifecycle carbon intensity under the clean transportation standard shall receive credits from the Agency upon verification described in subsection (b) at the end of a reoccurring reporting period as determined by the Agency. Fuel providers that are deficit generators during a year shall eliminate the deficit by either producing or importing transportation fuels whose carbon intensity is at or below the level of that year's annual clean transportation standard or by purchasing credits to offset the deficit. The system of credits created under this subsection shall provide credits based on a lifecycle emissions performance-based approach that is technology neutral, feedstock neutral, and has the purpose of achieving fuel decarbonization.

(b) The Agency must, in collaboration with the Department of Agriculture and the Department of Transportation, establish acceptable methods to verify that the transportation fuel used by regulated entities has been produced or imported following the pathway bearing the unique identifier as attested by the regulated entity. The Agency is authorized to contract with third party verifiers to accomplish this requirement. Upon registering with the program, regulated entities must agree to provide data related to the registered fuel pathway used to generate credits or deficits with the Agency as required to administer the program. Upon registering with the program, regulated entities must agree to be subject to periodic audits as determined by the Agency.

All information gathered by or provided to the Agency or contractors of the Agency, either by regulated entities, agents of regulated entities, or growers of feedstock used in a registered fuel pathway by regulated entities, through either voluntary disclosure or audit, must not be shared by the Agency with any party except in relation to the administration of the clean transportation standard absent written consent by the regulated entity and the entity from which the data was gathered. This data must not be used for any purpose outside of the administration and enforcement of the clean transportation standard except by written consent from the original data holder. Ownership of all data shared or collected by the Agency for the administration and enforcement of the clean transportation standard is retained with the entity from which the data originates. Data protected under this subparagraph does not include a regulated entity's credit or deficit balance, which may be publicly disclosed by the Agency.

(c) Deficit generators who fail to offset their deficits at the conclusion of any compliance period administered by the Agency shall be subject to a civil penalty established by the Agency subject to the following limitations:

(1) the value of the penalty shall correspond to the amount of deficits attributed to a given regulated entity at the time the transaction has completed; and

(2) for every one deficit the regulated entity fails to offset, the penalty for failure to offset that deficit shall not exceed 10 times the value of the credit needed to offset the deficit.

(d) Regulated entities that submit false information in support of an application to register for the clean transportation standard, that share false information during an audit or in support of an attestation, or that otherwise share false or inaccurate information to the Agency or a contractor working under the direction of the Agency shall be subject to penalties to be determined by the Agency by rule. Penalties under this paragraph may include monetary penalties, forfeiture of credits, and reversals of prohibited transactions as described in subparagraph (B) of paragraph (6) of Section 20. The Agency may waive penalties under this subparagraph. If the violator under this subsection is a credit generator, following 3 violations, the Agency may remove the violating credit generator from the clean transportation standard. In determining whether penalties should be applied and, if a penalty is to be applied, the amount of penalties to be levied for violations under this subparagraph, the Agency shall consider:

(1) evidence of willfulness by the regulated entity to submit false information;

(2) the scope of the false information;

(3) evidence of past submissions of false information; and

(4) efforts undertaken by the regulated entity to remedy the false submission.

(e) The penalties provided for in this Section may be recovered in a civil action brought in the name of the people of the State of Illinois by the State's Attorney of the county in which the violation occurred or by the Attorney General. Any penalties collected under this Section in an action in which the Attorney General has prevailed shall be used to offset registration fees in support of the administration of the clean transportation standard program. Any amount of penalties collected in addition to the amount needed to administer the clean transportation standard program shall be deposited in the Environmental Protection Trust Fund, to be used in accordance with the provisions of the Environmental Protection Trust Fund Act.

(f) The Attorney General or the State's Attorney of a county in which a violation occurs may institute a civil action for an injunction, prohibitory or mandatory, to restrain violations of this Act or to require such actions as may be necessary to address violations of this Act.

(g) The penalties and injunctions provided in this Act are in addition to any penalties, injunctions, or other relief provided under any other law. Nothing in this Act bars an action by the State for any other penalty, injunction, or other relief provided by any other law.

Section 30. Lifecycle carbon intensity calculations; software. The lifecycle carbon intensity calculation conducted by the Agency under paragraph (2) of Section 20 shall use the Argonne National Laboratory's GREET model and shall include all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distribution, delivery, and use of the finished fuel by the ultimate consumer. The Agency shall, as needed and periodically as established by rule, use as up-to-date a model as possible, taking into account staffing and hiring needs. In calculating the lifecycle carbon intensity, the mass values for all greenhouse gases that are not carbon dioxide must be adjusted to account for each of their relative global warming potentials. This adjustment shall be performed using the global warming potential deemed most accurate by the Agency for each greenhouse gas for the period during which reductions in greenhouse gas emissions are to be attained under the clean transportation standard. When measuring the carbon intensity of biofuels, the Agency shall use the GREET model's Feedstock Carbon Intensity Calculator (FD-CIC) for the purposes of accounting for variations in farming practices across different fuel pathways.

Section 35. Investments by backstop aggregators and utilities. In implementing this Act, the Agency and Board are empowered to, and shall consider establishing, rules under the standard to support transportation electrification investments in disadvantaged communities. Those rules may direct participating utilities and backstop aggregators under the standard to allocate revenue earned from trading credits, or a fraction thereof, toward those investments. The Agency and Board shall determine projects and goals under this Act in consultation with relevant stakeholders, including, but not limited to, credit generators, affected communities, and environmental justice advocacy organizations.

Section 40. Exemptions. The following fuels are exempt from the clean transportation standard established in Section 15:

(1) aviation fuels;

(2) transportation fuel used in locomotives;

(3) transportation fuel used in ocean-going vessels; and

(4) fuel used in military tactical vehicles and tactical support equipment owned by the U.S. Department of Defense or the U.S. military services. However, producers, providers, and suppliers of these fuels, if deemed to be clean fuels, shall be eligible under the rules adopted pursuant to this Act to receive credits on an opt-in basis that may be applied to future obligations or sold to deficit generators.

Section 45. Agency reporting obligation. Within 12 months after the Board adopts the rules proposed by the Agency under Section 15, the Agency shall submit a report to the General Assembly detailing the implementation of the clean transportation standard, the reductions in greenhouse gas emissions that have been achieved through the clean transportation standard, and targets for future reductions in greenhouse gas emissions. These reports shall include feedback solicited from stakeholders under paragraph (7) of Section 20.

Section 50. Fuel supply forecasting. In consultation with the Department of Transportation and the Department of Agriculture, the Agency must develop a periodic fuel supply forecast to project the availability of fuels to the State necessary for compliance with clean transportation standard requirements. The fuel supply forecast for each upcoming compliance period must include, but is not limited to, the following:

(1) an estimate of the potential volumes of gasoline, gasoline substitutes, and gasoline alternatives, and diesel, diesel substitutes, and diesel alternatives available to the State. In developing this estimate, the Agency must consider, but is not limited to, considering:

(A) the existing and future vehicle fleet in this State; and

(B) any constraints that might be preventing access to available and cost-effective low-carbon fuels by the State, such as geographic and logistical factors, and alleviating factors to the constraints;

(2) an estimate of the total banked credits and carried over deficits held by regulated parties, credit generators, and credit aggregators at the beginning of the compliance period, and an estimate of the total credits attributable to fuels described in paragraph (1);

(3) an estimate of the number of credits needed to meet the applicable clean transportation standard requirements during the forecasted compliance period; and

(4) a comparison in the estimates of paragraphs (1) and (2) with the estimate in paragraph (3), for the purpose of indicating the availability of fuels and banked credits needed for compliance with the requirements of this chapter.

The Agency may appoint a forecast review team of relevant experts to participate in the fuel supply forecast or examination of data required by this Section. The Agency must finalize a fuel supply forecast for an upcoming compliance period by no later than 90 days prior to the start of the compliance period.

Section 55. Forecast deferral.

(a) No later than 30 calendar days before the commencement of a compliance period, the Agency shall issue an order declaring a forecast deferral if the fuel supply forecast under Section 50 projects that the amount of credits that will be available during the forecast compliance period will be less than 100% of the credits projected to be necessary for regulated parties to comply with the scheduled applicable clean transportation standard adopted by the Agency for the forecast compliance period.

(b) An order declaring a forecast deferral under this Section must set forth:

(1) the duration of the forecast deferral;

(2) the types of fuel to which the forecast deferral applies; and

(3) which of the following methods the Agency has selected for deferring compliance with the scheduled applicable clean transportation standard during the forecast deferral:

(A) temporarily adjusting the scheduled applicable clean transportation program standard to a standard identified in the order that better reflects the forecast availability of credits during the forecast compliance period and requiring regulated entities to comply with the temporary standard;

(B) requiring regulated entities to comply only with the clean transportation standard applicable during the compliance period prior to the forecast compliance period; or

(C) suspending deficit accrual for part or all of the forecast deferral period.

(c) In implementing a forecast deferral, the Agency may take an action for deferring compliance with the clean transportation standard other than, or in addition to, selecting a method under paragraph (3) of subsection (b) only if the Agency determines that none of the methods under paragraph (3) of subsection (b) will provide a sufficient mechanism for containing the costs of compliance with the clean transportation standard during the forecast deferral.

(d) If the Agency makes the determination specified in subsection (c), the Agency shall:

(1) include in the order declaring a forecast deferral the determination and the action to be taken; and

(2) provide written notification and justification of the determination and the action to:

(A) the Governor;

(B) the President of the Senate;

(C) the Speaker of the House of Representatives;

(D) the Majority and Minority Leaders of the Senate; and

(E) the Majority and Minority Leaders of the House of Representatives.

(e) The duration of a forecast deferral may not be less than one calendar quarter or longer than one compliance period. Only the Agency may terminate, by order, a forecast deferral before the expiration date of the forecast deferral. Termination of a forecast deferral is effective on the first day of the next calendar quarter after the date that the order declaring the termination is adopted.

Section 60. Conflicts with other State programs. Nothing in this Act precludes the Agency or Board from adopting or maintaining other programs as permitted or required by existing or future legislation to reduce greenhouse gas emissions from the transportation sector.

Section 99. Effective date. This Act takes effect upon becoming law.".