ASSEMBLY ENVIRONMENT, NATURAL RESOURCES, AND SOLID WASTE COMMITTEE
STATEMENT TO
ASSEMBLY, No. 3645
with committee amendments
STATE OF NEW JERSEY
DATED: MARCH 10, 2025
The Assembly Environment, Natural Resources, and Solid Waste Committee reports favorably and with committee amendments Assembly Bill No. 3645.
This bill, as amended by the committee, would establish a low-carbon transportation fuel standard program in the Department of Environmental Protection (DEP).
Under the program, each refiner, wholesaler, or importer of diesel or gasoline, and each producer of alternative fuel, would be required to ensure that the fuel refined, sold, imported, or produced by the entity, as applicable, and supplied for use in the State, meets the low-carbon transportation fuel standard, on an annual basis. The low-carbon transportation fuel standard would be a maximum level of greenhouse gas emissions associated with the entire life-cycle of a given unit of fuel, including its production, transportation, storage, and consumption. An alternative fuel, under the bill, is any fuel used for transportation other than gasoline or diesel. Such fuels could include hydrogen, biodiesel, or electricity.
In implementing the program, the DEP would be required to establish a system of salable and tradable credits and deficits, under which a given unit fuel that exceeds the low-carbon transportation fuel standard would generate a credit and a given unit of fuel that does not meet the standard would generate a deficit. Entities regulated under the program would be required to ensure that they do not generate any net deficits in a given year, after offsetting their deficits with credits they generate or purchase from third parties.
The bill would establish certain requirements for the low-carbon transportation fuel standard program, as enumerated in subsection b. of section 3 of the bill, including the requirement that the program reduce the greenhouse gas emissions associated with the diesel and gasoline used in the State by five percent below 2019 levels by the year 2030 subject to biennial reviews commencing in 2027, to assess technological advancements, market readiness, and environmental impacts. The bill would also enumerate certain optional requirements for the program, in subsection c. of section 3 of the bill, including a cost containment mechanism that is designed to allow for both sufficient compliance flexibility and maximum greenhouse gas emissions reductions. The bill would establish penalties for persons who violate the bill’s provisions, including by selling fuel that does not meet the low-carbon standard and by fraudulently obtaining credits under the program. Maximum civil penalties would range between $75,000 and $500,000 for each offense, depending on the nature of the violation, and maximum civil administrative penalties would be set at $75,000 for a first violation and $250,000 for a second and each subsequent violation.
The bill would direct the DEP to establish an alternative compliance payment (ACP), which fuel suppliers and producers could pay in lieu of satisfying the low-carbon transportation fuel standard. The amount of the ACP would range between $75 and $125 per metric ton of greenhouse gas emissions, depending on the price of a low-carbon transportation fuel credit. The ACP would be collected by the DEP and used to provide grants to transportation infrastructure projects that reduce greenhouse gas emissions from the transportation sector. Section 5 of the bill would also establish the “Low-Carbon Transportation Fuel Alternative Compliance Fund” (fund) in the DEP and direct the DEP to establish a program to award grants from the moneys in the fund.
The bill would also direct the DEP to establish an anonymous reporting system whereby whistleblowers could report potential violations of the bill’s provisions. The bill would direct the DEP to begin investigating reports within 30 days of receipt. The bill would provide that, in cases where the whistleblower’s report led to the collection of monetary penalties, the whistleblower would receive between 10 percent and 30 percent of the penalties collected. Finally, the bill would require the DEP to conduct a fuel impact study every three years to evaluate the program’s effect on fuel prices, credit market stability, and economic feasibility.
COMMITTEE AMENDMENTS:
The committee amendments to the bill:
(1) revise the finding and declarations section;
(2) revise the definitions of "alternative fuel," "carbon intensity," "credit generator, " "diesel," "GREET model," and "transportation";
(3) add a definition of "overburdened community";
(4) require the DEP to establish the transportation fuel standard within 18 months after the bill's enactment, rather than one year;
(5) provide that the program's goal is to reduce the average carbon intensity of diesel and gasoline used in the State by five percent below 2019 levels by the year 2030, subject to biennial reviews commencing in 2027, rather than 10 percent;
(6) revise the language governing how the DEP calculates the lifecycle greenhouse gas emissions of transportation fuels;
(7) require the program to include a mechanism by which program participants may generate credits from activities and projects that result in the reduction of carbon intensity of transportation fuels;
(8) clarify that gasoline, diesel, or other fuels used by aircraft, railroad locomotives, military vehicles and interstate waterborne vessels, or for other non-transportation uses, are exempt from the low carbon standard, but may be used to generate credits on a voluntary, opt-in basis, provided that the fuels achieve an initial minimum 10 percent lifecycle carbon intensity reduction, increasing to 20 percent within 10 years;
(9) require the program to include a review and request for additional GREET modeling scenarios from Argonne National Laboratory, as necessary, to reflect New Jersey-specific fuel pathways, after consultation with industry stakeholders and scientific experts, to ensure consistency with national best practices;
(10) delete language containing examples of ways in which electric public utilities, State agencies, and State authorities may direct at least 40 percent of their overall credit value to electrified transportation programs, projects, or investments to directly benefit overburdened communities, as required under the bill;
(11) delete a provision that would have authorized the DEP to review and alter the method by which the carbon intensity of fuels is calculated;
(12) remove a provision that would have authorized the DEP to include mechanisms whereby producers of alternative fuel may voluntarily opt-in to the program to generate credits when the fuel use displaces the combustion of gasoline or diesel for a non-transportation use, and instead require the credits to be related to the displacement of a fuel that is used for transportation;
(13) provide that co-processed fuel, which is produced by blending biomass-based feedstocks with petroleum in refineries, may be considered low-carbon for the purposes of the bill;
(14) prohibit persons from banking low-transportation fuel credits with the intent of manipulating market supply;
(15) establish penalties for violations of the bill’s provisions;
(16) authorize the DEP to recommend to the Legislature adjustments to the fuel carbon intensity requirements of the program;
(17) direct the DEP to establish an alternative compliance payment system and provides for the distribution of funds derived from the alternative compliance payment;
(18) add a new section, which directs the DEP to establish an anonymous reporting program though which whistleblowers can report potential violations of the bill’s provisions;
(19) add a new section, which directs the DEP to conduct a fuel impact study every three years to evaluate the program’s effect on fuel prices, credit market stability, and economic feasibility; and
(20) make technical corrections to the bill.