Introduction
On January 1st, 2024, the California Air Resources Board (CARB) came out with new regulations requiring the use of renewable diesel in certain fleets. The following article is BASCL’s review of this legislation with regards to how it impacts the general contracting community in California.
What is Renewable Diesel?
Renewable diesel can be used as a drop-in biofuel that meets ASTM D975 – the standard specifications for diesel fuel oils. It can be seamlessly blended and transported in conventional petroleum pipelines and sold at retail stations, with or without blending with petroleum diesel. Renewable diesel can be produced from nearly any biomass feedstock, including the same feedstocks as biodiesel fuels. Primary feedstocks for both biodiesel and renewable diesel in the US include various vegetable oils, but can also include animal fats from meat processing plants and used/recycled cooking oil. Rapeseed oil, sunflower oil, and palm oil are major feedstocks for biodiesel production in other countries. Algae is also an additional potential source for biofuels. (Energy.gov)
While renewable diesel and biodiesel are derived from the same feedstocks and both are called biofuels, the way the two fuels are processed have some important differences. Renewable diesel production uses a hydrogenation process rather than the esterification process used to produce biodiesel, meaning that the final products are chemically unique. Unlike biodiesel, renewable diesel in its final form is a hydrocarbon that is chemically equivalent to petroleum diesel, which is why it is a suitable drop-in conventional diesel replacement. (ibid.)
Biodiesel is used as a diesel blend stock in limited volumes (up to 20%, or “B20”) rather than as a direct substitute for conventional diesel. Renewable diesel blends are labelled with an R followed by the percentage (by volume) of the renewable diesel content. Because renewable diesel can be used as a direct substitute for conventional diesel, it does not need to be blended and can be used as a 100% replacement (R99 or R100) and it offers flexibility not found with traditional biofuel blends. Because renewable diesel is a cleaner fuel than petroleum diesel, it reduces the wear and tear on engines and requires less maintenance. This also means that it's possible to seamlessly switch back and forth between renewable diesel and conventional diesel, which is not possible with biodiesel blends. (Foster Fuels, 2024)
Regulation Summary
Starting January 1st, 2024, trade partners and vendors are required to utilize R99 or R100 Renewable Diesel for all off-road fleets, with limited exceptions. Evidence of compliant fueling must be collected by the fleet owner and maintained for a minimum of 3 years after the transaction is completed.
The CARB In-Use Off-Road Diesel-Fueled Fleets Regulation (Off-Road Regulation) applies to all self-propelled off-road diesel vehicles 25 horsepower or greater used in California, and most two-engine vehicles (except on-road two-engine sweepers). This includes vehicles that are rented or leased (rental or leased fleets).
Limited exceptions include the inability to procure renewable diesel, any fleet or fleet portion that is entirely composed of vehicles with Tier 4 final off-road engines, model year 2010 or newer on-road engines, or zero-emission vehicles. To demonstrate the exception, fleet owners are required to keep records describing the normal refueling methods, their documented attempts to procure renewable diesel fuel, and proof that shows they were not able to procure renewable diesel (i.e., correspondence or contractor bids).
The exact regulatory language can be found here: https://ww2.arb.ca.gov/our-work/programs/use-road-diesel-fueled-fleets-regulation.
What were some questions we had as contractors?
The BASCL group sent some initial questions to CARB to help clarify our understanding of our responsibility as prime contractors. Our questions, and CARB's responses, are presented below:
Do subcontractors/vendors need to submit fuel receipts to the prime contractor; or is collecting volumes and type sufficient?
“The fuel receipts do not need to be submitted to prime contractors, rather they should be kept by the fleet owners to make sure they have recordkeeping in case enforcement comes by for an audit.”
What are the repercussions for non-compliance? Who receives penalties, if any?
“For penalties, it should be assessed to the fleet owner (i.e equipment owners) and is based on a number of different factors that are outlined in CARBs Enforcement policy. Fleets should make sure they have sufficient recordkeeping of all documentation to back up their claim and it shows the time and volume of fuel procured.”
Does this regulation amendment apply to rental equipment?
“The In-Use Off-Road Diesel-Fueled Fleets Regulation (Off-Road Regulation) applies to all self-propelled off-road diesel vehicles 25 horsepower or greater and most two-engine vehicles (except onroad two-engine sweepers) owned or operated in California. This includes vehicles that are rented or leased (rental or leased fleets).” (page 59 of this document - Final Regulation Order Attachment A-1)
“Beginning January 1, 2024, all fleets subject to this regulation are required to procure R99 or R100 renewable diesel and use this fuel in all vehicles subject to this regulation, including rental equipment, when operating them in California, subject to the exemptions provided in section 2449.1(f)(2)” (page 86 of this document)
“Fleets that provide for rent vehicles subject to this regulation to other entities must include language in their rental contract that the recipient of the rented vehicle (renter) must comply with the renewable diesel requirements in section 2449.1(f). Rental fleets that include such language in their rental contracts will not be held liable if a rented vehicle under their ownership is not compliant with section 2449.1(f). If CARB requests information from a rental fleet to verify compliance with the renewable diesel requirements in section 2449.1(f), then the rental fleet must disclose the relevant renter’s company name and business contact information to CARB within 5 days of CARB’s request.” (page 88 of this document)
Does it apply to generators?
“The Off-Road regulation applies to self-propelled off-road vehicles (a.k.a. equipment or machines) with diesel-fueled or alternative diesel-fueled (including biodiesel) engines that are 25 horsepower (hp) or greater…Diesel equipment that is not self-propelled (i.e. equipment that does not contain an engine that provides motive power or portable equipment), such as diesel generators and air compressors, are not covered under the Off-Road regulation.” (from the Off-Road Diesel Regulation General Applicability FAQ)
Further exemptions can be found in the General Applicability FAQ and the Final Regulation Order)
Additional FAQs about the CARB Off-Road Diesel Regulation can be found here.
Recommendations for Prime Contractors
There are several steps that prime contractors can take to ensure that their projects are compliant with this regulation:
Collect fuel receipts for direct-procured fuel: As noted above, prime contractors only are required to collect fueling receipts if the fuel is procured directly through the prime contractor. When this is the case, the receipts need to be kept for a minimum of 3 years after the work takes place. Work with your self-perform operations groups and project accountants to ensure that invoices are archived.
Require subcontractors to report monthly fuel use: If your company reports on jobsite emissions, modify your fuel reporting forms to include renewable diesel. If you see fuel tickets submitted that report standard diesel, engage in a conversation to understand why.
Tell your subcontractors about the change: Whether it be through a morning trade partner huddle, through an all-hands call, via email, or all of the above – make sure that all subcontractors are aware of the new requirements.
Risks associated with Renewable Diesel
There are risks to renewable diesel that prime contractors need to consider:
US supply is limited: With the new regulation, there may be a strain on supply even if that is not currently reflected in today’s market pricing. As of February 2024, there are only 17 plants in the US. While the gap is closing with new infrastructure being built, domestic production is limited and supply is primarily limited to the West Coast.
Life cycle carbon benefits vary greatly depending on feedstock and transportation distance: Renewable diesel can be derived from both seed oils and animal products, as well as from both virgin and post-consumer feedstocks. Both feedstock and fuel can also originate from out of state and even internationally, increasing transportation emissions. All these factors combined can affect the life cycle carbon emissions of renewable diesel.
Renewable diesel feedstocks have the same environmental concerns as biodiesel: Renewable diesel is derived from both plant and animal-based agricultural products. Both of these industries can contribute to environmental issues such as eutrophication, acidification, and deforestation. The demand for renewable diesel can also create a monoculture with a prioritization of feedstock seed oils and animal products over food on limited agricultural land. For example, in Malaysia, palm oil is mass produced to meet global feedstock demands at the cost of impacting local rainforests and food prices.
Closing
Working through this new regulation, the BASCL group has learned more about renewable diesel as both a product and as an industry. Some key considerations and thoughts are as follows:
From a carbon and air quality perspective, it appears to be an appropriate temporary solution on our path to zero carbon and all-electric jobsites and is preferable to conventional diesel.
Renewable diesel also offers superior maintenance benefits to conventional diesel.
Renewable diesel can be paired with other solutions like batteries.
Additional investigation on feedstocks is warranted, particularly when the use of renewable diesel is expanding swiftly.
Construction is changing rapidly and the use of renewable diesel warrants continual revisiting.
We will likely continue to learn more about the externalities associated with the use of renewable diesel as the market grows.
Resources
Video for Prime Contractors on Renewable Diesel
U.S. Renewable Diesel Fuel and Other Biofuels Plant Production Capacity (eia.gov) – Renewable Diesel Fuel Plants Map
Alternative Fuels Data Center: Renewable Diesel (energy.gov) – Informational Sheet from EIA on Renewable Diesel
*A note on point-of-purchase fueling stations: This tool allows you to only select “renewable diesel (R20 and above)” in the dropdown. The Off-Road Diesel Regulation requires the use of R99 or R100, so fuel at a standard of R20 would not be sufficient to meet the requirements of this regulation. Additionally, point-of-purchase fuel services are not likely to indicate the exact fuel blend on receipts. This approach is not recommended.