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State Energy Update: Electrification, Clean Heat Standards and Biofuels Oil & Energy’s Annual Review of State Regulations

Oil & Energy’s Annual Review of State Regulations

In the fall of 2023, 25 governors united as the U.S. Climate Alliance and collectively pledged to install at least 20 million heat pumps by 2030, with the aim of “ensuring at least 40% of benefits flow to disadvantaged communities.” If carried out, the pledge would effectively quadruple the number of heat pumps in use throughout constituent states. In total, the Alliance represents approximately 55 percent of the U.S. population and 60 percent of its economy. Many of those governors lead states where residents and businesses rely on liquid heating fuels and a majority of Oil & Energy readers live and work.

The states and governors of the Alliance are:

Arizona, Gov. Katie Hobbs
California, Gov. Gavin Newsom
Colorado, Gov. Jared Pols
Connecticut, Gov. Net Lamont
Delaware, Gov. John Carney
Guam, Gov. Lou Leon Guerrero
Hawai’i, Gov. Josh Green
Illinois, Gov. JB Pritzker
Louisiana, Gov. John Bel Edwards
Maine, Gov. Janet Mills
Maryland, Gov. Wes More
Massachusetts, Gov. Maura Healey
Michigan, Gov. Gretchen Whitmer
Minnesota, Gov. Tim Walz
New Jersey, Gov. Phil Murphy
New Mexico, Gov. Michelle Lujan Grisham
New York, Gov. Kathy Hochul
North Carolina, Gov. Roy Cooper
Oregon, Gov. Tina Kotek
Pennsylvania, Gov. Josh Shapiro
Puerto Rico, Gov. Petro Pierluisi
Rhode Island, Gov. Daniel McKee
Vermont, Gov. Phil Scott
Washington, Gov. Jay Inslee
Wisconsin, Gov. Tony Evers

The governors made additional promises beyond their heat pump pledges:

Ten states will explore adoption of zero-emission standards for space and water heating equipment (CA, CT, HI, MA, MD, NY, OR, PA, RI, WA).
Eight states will explore adoption of Building Performance Standards like those enacted in CO, MD, OR, and WA (CA, CT, HI, MA, ME, NY, PA, RI).
Eight states will explore development of clean heat standards (CT, HI, MA, MD, NJ, NY, PA, and RI).
Five states will try to phase out fossil fuel use in new construction by 2027 (CA, MA, MD, NY, and WA).
Twelve states will support development and adoption of advanced energy-efficient building codes that “maximize” electrification and “support solar energy and electric vehicle readiness” (CA, CO, CT, MA, MD, ME, NM, NY, OR, PA, RI, WA).
Ten states also promised to align building sector utility resource planning and procurement policies with state climate goals (CA, CT, HI, MA, MD, NJ, NY, OR, RI, WA).
Hawaii and Maine further pledged to reduce direct (scope 1) and indirect (scope 2) greenhouse gas emissions from state facilities by 50% in the next 10 years.

Of course, these are not the only actions these and other states are taking against liquid heating fuels. And, at the same time, there are many regional governments that continue to support biodiesel and renewable fuel blends for heating and transportation. It has become an annual feature for Oil & Energy Magazine to compile as comprehensive a chart as possible of the various mandates, laws, and plans that affect our audience. The State Biofuel and Electrification Chart begins on page 28.

“We’re in a time of great challenges and great opportunities. As an industry, our retailers have a much different relationship with consumers than the utilities. That trust, that personal connection, opens the door. When consumers realize that we have a solution to carbon emissions that is more accessible and will not cost tens of thousands of dollars, they will make their voices heard in the state houses. We have an opportunity for success as energy markets change, as long as we focus on changing with them,” Sean Cota, President of the National Energy and Fuels Institute (NEFI), said at their December Government Affairs Committee (GAC) meeting.

The GAC meeting was open to all members and streamed over Zoom. We are providing our readers with the following summary of the meeting to provide context to the State Biofuel and Electrification Chart.

NEFI’s Anne Steck, Sr. Policy Advisor, and Jim Collura, Vice President of Governmental Affairs, provided updates on the Renewable Fuel Standard, Renewable Volume Obligations, Higher Biofuel Infrastructure Investment Program (HBIIP), and the Inflation Reduction Act’s various incentives. Collura emphasized that many of the rebates outlined in the IRA, which are to be managed by states, are still close to a year away from becoming available to residents. In the weeks since the update, the Department of Energy announced that only four states have submitted funding applications for the residential electrification and efficiency rebates to date. States have until August 16, 2024, to notify the DOE if they will reject the funds (Florida has done so already), and until January 31, 2025, to submit funding applications.

Collura also updated attendees on how NEFI and its members’ advocacy were instrumental in getting renewable liquid fuel boilers and furnaces included in the IRA’s tax credit structure. At the time of the meeting, the Environmental Protection Agency had proposed removing liquid fuel and gas furnaces and boilers and central air conditioners from the ENERGY STAR® program. NEFI’s call to action succeeded in sending approximately 700 letters of opposition to the EPA, and NEFI submitted letters to the EPA and elected officials. NEFI also joined a coalition of energy-related organizations, including the American Gas Association, the National Propane Gas Association, the Oilheat Manufacturers Association, Plumbing Heating, Cooling Contractors and others to oppose this decision. In early January, the pressure campaign bore fruit, and the EPA placed a hold on the proposal to remove our equipment from ENERGY STAR®.

State Updates

Massachusetts: Calling it “the most significant matter I’ve dealt with,” Michael Ferrante, President of the Massachusetts Energy Marketers Association reviewed his state’s Clean Heat Standard (CHS). Originally cited in state energy plans in 2020, the CHS is an amalgamation of proposals that would raise energy prices for all consumers. MEMA has been engaged in continuous efforts to make liquid biofuels eligible for clean heat credits, transparently score the electric grid’s carbon and GHG emissions, and limit the costs to retailer fuel marketers and planned erosion of their customer base.

“If enacted, the Clean Heat Standard regulation presents opportunities for heating oil companies in Massachusetts to accelerate the blending of renewable liquid fuels – Bioheat® fuel – in home heating oil, but long-term the regulation is designed to eliminate fossil fuel use,” said Ferrante. “Working on this proposed regulation is our association’s top priority in 2024,” he added.

Vermont: Vermont’s Clean Heat Standard (originally the Affordable Heat Act) was enacted in the summer of 2023. It is currently in the midst of an 18-month review process. Should the review find the CHS unworkable, or if the November 2024 elections change the makeup of the state legislature, the CHS or parts of it can be revoked. Matt Cota, President of the Vermont Fuel Dealers Association, is part of the Technical Advisory Group and Equity Advisory Group that will try to make sense of the plans and report to the General Assembly in February 2024 and again in January 2025 before a final determination is made.

Even though the policy has not been finalized, clean heat credits are available, earned retroactively to January 1, 2023, for the sale of renewable liquid fuels, weatherization, and installation of higher efficiency heating equipment. Also, by January 31, 2024, all businesses that sell fossil-based heating fuel into or in Vermont, including oil, propane, natural gas and kerosene, must have registered with the Vermont Public Utility Commission. The form requests information about the business; the heating fuels sold into or in Vermont; the companies from which the fuels were purchased and to which the fuels were sold; fuels brought to the state but not sold; and any heating fuel produced, refined, manufactured, or compounded in Vermont. Just before this issue went to print, the PUC granted VFDA’s request to treat volumetric information and the identities of suppliers and client business information as trade secrets and would keep this information confidential.

“In my mind, it’s a way to electrify the thermal sector, but they left open a crack for us. We advocated for the stopgap/check-back option. It doesn’t mean we’ll be able to stop it, but we’ll have a shot. At the same time, we can’t assume we’ll win in November,” Matt Cota said.’’

Maine: Charlie Summers, President of the Maine Energy Marketers Association, reviewed his group’s successful efforts against Efficiency Maine’s misguided attempt to force homes and businesses to disconnect fossil fuel heating system in order to earn rebates for heat pump installation. Efficiency Maine had initially recommended that the oil and gas systems be shut off – going as far as producing a video telling consumers to “clip” the electrical wire going to the system – yet allowed them to keep the original systems in place to use as back-up for the heat pump in extreme weather.

MEMA, working with the Propane Gas Association of New England and Summit Natural Gas, wrote to the governor and legislators about the serious health, equipment and personal safety hazards with this plan. They reiterated the fact that their members sold heat pumps, and their concerns were strictly over consumer safety and personal choice. The issue was picked up by the news media and consumers rallied over the dangers. Efficiency Maine reversed course, and rebates for heat pumps will not require the non-electric systems to be disconnected.

“It’s incumbent on us to communicate to legislators what these agencies are doing and important that we get that message out to the public. The public was outraged by Efficiency Maine’s disregard for their safety and their freedom of choice. I was copied on emails to the governor that said, ‘I have heat pumps, but I’m not shutting my fossil fuel systems down to get a rebate.’ We have to be creative in the way in which we defend ourselves, and in the way we get our message out. There’s a lot of incoming fire, but there’s also a lot of strength in the associations we can form with like-minded groups,” Summers said.

Connecticut: According to David Chu, Vice President of the Connecticut Energy Marketers Association, their efforts helped defeat about a dozen bills in 2023, including ones that would have declared a climate emergency, which would have given the Governor and legislature expanded powers; and a constitutional amendment to an individual’s right to have clean air, water and environment. Had the amendment passed, Connecticut and energy providers could face lawsuits for not ensuring this right, similar to the environmental “rights” cases brought in Montana. CEMA was also instrumental in the passage of a positive energy assistance bill which will help dealers get assistance payments more in line with the costs of the fuel at the time of delivery.

CEMA’s biggest success was getting the governor to pull back pending regulations that would have forced Connecticut businesses and homes to purchase electric vehicles, Chu reported. By 2027, 43 percent of passenger cars would be required to be zero-emissions, and 100 percent by 2035 along with 75 percent of trucks. CEMA and its partners focused on the social justice issue: low-income individuals are likely to be living in apartment buildings without home charging systems and EVs cost thousands more than most cars. While this issue may come up again in 2024 – or more likely after the elections – should this be “officially” revoked, Connecticut would be the only state that adopted California CARB laws on zero emissions to reverse course.

“Connecticut seems to be moving a bit slower than some of the other states in the region with their electrification efforts. There seems to be a disconnect between Governor Lamont’s administration and the legislature on how fast the state should move to decarbonize. While Lamont wants to move entirely to electricity, legislators are willing to include low-carbon liquid fuels. 2024 will produce more debate on what Connecticut’s energy future looks like,” Chris Herb, CEMA President, added, when reached after the meeting.

New York: Rocco J. Lacertosa, Chief Executive Officer of the New York State Energy Coalition, reviewed a plethora of issues either passed or under consideration, including New York City Local Law 154 prohibiting the installation of new natural gas and liquid fuels combustion equipment for heating and cooking; state-wide codes prohibiting fossil fuel heating in the construction of new buildings less than seven stories by 2026; and similar legislation for larger buildings by 2029. Zero-emissions standards prohibiting the replacement of fossil-fueled heating systems have been tabled for the moment.

Lacertosa also discussed the Governor’s exploration of cap-and-invest plans and statewide legislation for a new Superfund Act that would target major oil and natural gas producers to pay for climate change adaptations and mitigation efforts.

At the same time, New York is one of the few states with an active biofuel mandate. As of July 2023, all heating oil must contain at least 5 percent biodiesel (B5), with that growing to B20 by 2030.

“We’re working with the governor, Assembly and Senate to make sure the Bioheat® fuel dealers of our state continue to be a part of the clean energy transition. Cap-and-invest is just another way to try to raise our costs so high that property owners are forced to switch. But it’s not that easy. A building in New York City could be home to hundreds of individuals and dozens of businesses. The residents and workers of New York deserve to have a choice between affordable Bioheat® fuel or conversions that will cost the landlord millions and raise their rents or management fees,” Lacertosa said.

Pennsylvania: After 12 years of Republican control, the PA House of Representatives flipped in 2023 to a one-seat Democrat majority. The PA Senate remained in Republican control. This majority was put on pause multiple times throughout the year due to vacant seats that required a special election. A split general assembly and a fluctuating one seat Democrat majority in the House made 2023 one of the most unproductive legislative sessions in recent history. This dynamic limited any significant energy related legislation from successfully moving through both chambers due to lack of bi-partisan support.

Future energy policy debate in Pennsylvania hinges on the state’s participation in the Regional Greenhouse Gas Initiative (RGGI). The previous governor had used an executive order to join, which was eventually overruled by the state Commonwealth Court for not having legislature approval. The current governor has since appealed that decision to the state Supreme Court. If RGGI is ultimately rejected by the state court system, mounting pressure will be put on policymakers to consider alternative environmental and energy policies to replace the $600 million that RGGI would have generated for the state.

Under Republican leadership, both the House and Senate passed an energy choice bill that was vetoed by the previous governor in 2022. A new version of this bill was passed by the Republican controlled Senate in 2023 and has been sitting in the House for months but is unlikely to be passed by the Democratic majority. There is a low carbon fuel standard in the early stages of consideration, which currently has a 30-year reduction target. PPA, major oil companies, natural gas stakeholders, landfill associations and others are reviewing the initial memo, how it might incentivize renewable products such as biodiesel and renewable diesel, and how it might impact the marketplace.

“To my understanding, other New England states have reduction percentages in place, which are required by law and triggering policy to meet those goals. The difference for Pennsylvania, at this point, is that much of what has been proposed, such as the GHG reduction targets and 100 percent carbon-free electric by 2050, are aspirational. There are no legal requirements in place for either of these plans,” Harris explained.

New Hampshire: Joe Sculley, President of the Energy Marketers Association of New Hampshire, had a different viewpoint. The “Live Free or Die” state has no current anti-fuel or pro-electric legislation or clean heat standards under consideration. His association is looking at legislation regarding pre-buy contracts, ancillary fees, contract cancellation options and tank rental fees. They are also following the state’s legislation requiring installation of EV chargers at specifical locations, mostly in and around tourist areas, and how those would affect residential electric costs.

“New Hampshire is a lot different than it was when I moved here 15 years ago. Everyone wants to come here. Maybe that’s why my update was so different from the others,” Sculley said.

Rhode Island: Diane Quesnelle, President of the Energy Marketers of Rhode Island, was not able to attend the meeting, but provided an update. Her notes referenced that installations of EV charging stations have declined because of the increase draw of the electric grid; offshore wind installations will cost the state more than anticipated because of the heavy tariffs on materials coming from Europe; and that heat pump rebate submissions are coming through at a very low rate.

U.S. Climate Alliance Member

Regional Greenhouse Gas Initiative Member (Northeast)

State	GHG Targets	Biofuel Bills	Electrification Bills/Incentives	Other
Connecticut	Zero-Carbon Grid by 2040 45% Carbon Reduction below 2001 levels by 2030 80% Carbon Reduction below 2001 levels by 2040	ACTIVE: - B5: 7/1/2022 - B10: 7/1/2025 - B15, 7/1/2030 - B20, 7/1/2034 - B50, 7/1/2035	EnergizeCT: up to $15,000 combined incentives for air source or ground source heat pump¹ 66% zero-carbon electricity generation by 2030	Tax Exemption: Exempts biodiesel, low-sulfur dyed diesel, or heating oil made from "agricultural produce, food waste, waste vegetable oil or municipal solid waste," from state gross earnings on the sale of petroleum products
Delaware	26-28% GHG reduction from 2005 levels by 2025 50% Carbon Reduction by 2030 100% Carbon Reduction by 2050		Renewable Energy Portfolio, updated February 2021: 40% renewable by 2035 10% Solar by 2035²
Illinois			40% renewable energy by 2030 50% renewable energy by 2050 100% renewable energy by 2050	Tax Exemptions: Biodiesel and Renewable Diesel are exempted from sales tax on fuels as follows: Through 3/31/23: B10/R10 - B100/R100 4/1/24: B13/R13 and above 4/1/25 - 3/31/30: B16/R16 and above All years - December - March, exemption drops to B11/R11 and above
Maine	45% reduction in GHG below 1990 levels by 2030; 80% reduction in GHG below 1990 levels by 2050 Net-Zero Carbon by 2045		100,000 new heat pump installations by 2025 130,000 using one-to-two heat pumps; 115,000 using a "whole home" heat pump system by 2030 Install 15,000 heat pumps in income-eligible households by 2025 Develop "energy efficient building codes" to reach net-zero Efficiency Maine Rebates up to $8,000 for Heat Pumps³ 80% renewable energy by 2030	Biodiesel Producer Credit of $0.05/gallon/percentage blend Recognizes "wood, pellets and wood chips" as well as biodiesel and ethanol as biofuels
Maryland	60% GHG Reduction from 2006 levels by 2031 Net-zero GHG by 2045⁴		50% clean energy by 2030 Net zero grid by 2045	Buildings over 35,000 sq ft must report direct emissions from heating by 2025, and reduce emisions 20% by 2030, reach net-zero carbon by 2040
Massachusetts	85% GHG emissions below 1990 by 2030 Net-zero by 2050	Delayed indefinitely: B2 by July 1, 2010; B3 by July 1, 2011; B4 by July 1, 2012; B5 by July 1, 2013.	CLEAN HEAT STANDARD Fuel retailers forced to convert 3% of customers to heat pumps per year Clean Heat Credits - purchased by fuel providers - will pay for heat pump conversions Credit requirements and costs increase yearly, increasing costs for heating oil, natural gas and gasoline 2050 Decarbonization Roadmap calls for 1 million boilers/furnaces replaced with heat pumps by 2030	Alternative Energy Credits (AEC) for retail heating oil companies for B10 or higher blends
Michigan	28% GHG reduction below 2005 by 2025 52% by 2020 Carbon neutral by 2050
Minnesota	30% GHG reduction from 2005 by 2030 80% by 2050	ACTIVE: Mandated seasonal biodiesel blends B5: Oct 1-Mar 31 B10: Apr 1-Apr 14 B20: Apr 15-Sept 30	55% renewable by 2040
New Hampshire	20% GHG reduction below 1990 by 2025 80% by 2050
New Jersey	80% GHG reductions below 2006 by 2050
New York	40% GHG reductions from 1990 by 2030 85% by 2050 net zero statewide by 2050	ACTIVE: B5: 7/1/2022 (postponed to 7/1/2023) B10: 7/1/2025 B20: 7/1/2030	70% of electric generation from renewables by 2030 Zero emissions from statewide demand system by 2040	Residential Tax Credit: residential biofuel blends, $0.01/gallon/percentage blend, B6-B20 Biodiesel tax exemptions to B20
North Carolina	40% reduction in GHG emissions by 2025			Alternative fuels exempt from sales & use tax Biofuels distributors must register with Department of Revenue Biodiesel may be splash blended to B20
Oregon	45% GHG reduction below 1990 levels by 2035 80% by 2050	ACTIVE STATEWIDE: B5 in all diesel ACTIVE - PORTLAND B15/R15: 5/15/24 (wholesale 7/1/24 (retail) B50/R50: 5/15/26 (wholesale) 7/1/26 (retail) B99/R99: 5/15/30 (wholesale) 7/1/30 (retail)	- 80% reduction by electric utilities by 2030 - 90% by 2035 - 100% by 2040 State GHG neutral by 2030
Pennsylvania	26% reduction from 2005 by 2025 80% by 2050	B2 for on-road diesel No active heating oil regulations; 2023 Low Carbon Fuel Standard under review	100% carbon-free electric by 2050
Rhode Island	45% by 2030 80% by 2040 Net-zero by2050	ACTIVE: B5: 7/1/2021 B10: 7/1/2023 B20: 7/1/2025 B50: 7/1/2030	100% renewable energy standard	Biodiesel manufactured in RI and employing in RI - exempt from state motor fuel taxes Financing: Affordable long-term financing for renewable energy and energy efficiency upgrades and alternative fuel infrastructure.
Vermont	Mandated by law: 25% reduction below 2005 levels by 2025 40% reduction below 1990 by 2030 80% reduction below 1990 by 2050		CLEAN HEAT STANDARD Program subject to VT Legislative Review - All companies selling fuel "into or in Vermont" must register with Public Utility Commission by 1/31/24 - Clean heat credits will be earned when something is done to reduce GHG emissions in the thermal sector - No payments required unless and until the Vermont Legislature gives final approval in 2024
Virginia	Net-zero by 2045		30% from renewable energy by 2030 100% from carbon-free sources by 2040	Biodiesel Fuel Producers Income Tax Credits up to $5,000/year
Washington	45% below 1990 levels by 2030; 70% by 2040 95% by 2050		- 80% reduction by electric utilities by 2030 - 90% by 2035 - 100% by 2040 State GHG neutral by 2030	Clean Fuel Standard (Jan 1, 2023) -Transportation Fuels Based on Carbon Intensity (CI) - below standard generates credits; above standard generated deficits - must purchase credits to meet reduction requirement
Wisconsin	26-28% below 2005 levels by 2025		100% carbon-free electricity by 2050	Plan includes "avoiding all new fossil fuel infrastructure"
California	Carbon neutrality by 2045 Reduce GHG 85%			Phase-down of oil and gas extraction operations CARB transportation