Section 95487 - Credit Transactions(a)General. LCFS credits shall not constitute instruments, securities, or any other form of property. (1) A regulated entity may: (A) Retain LCFS credits without expiration for use within the LCFS market; and(B) Acquire or transfer LCFS credits. A third-party, which is not a regulated entity or acting on behalf of a regulated entity, may not hold, purchase, sell, or trade LCFS credits, except as otherwise specified in section 95483.(2) A regulated entity may not: (A) Use credits in the LCFS program that are generated outside the LCFS program, including credits generated in other tradeable emission credit programs administered by the California Air Resources Board.(B) Borrow or use credits from anticipated future carbon intensity reductions to demonstrate compliance pursuant to section 95485(a). This does not preclude contracting for future delivery of LCFS credits as described in section 95487(b)(1)(B), nor participation in the credit clearance market described in section 95485(c).(C) Generate LCFS credits from fuels exempted from the LCFS under section 95482(d) or are otherwise not eligible pursuant to section 95482.(D) Sell or transfer credits at a price that exceeds the Maximum Price set by the following formula: 1. $200/credit (MTCO2e) in 2016.2. This per credit price shall be adjusted annually by the rate of inflation as measured by the most recently available twelve months of the Consumer Price Index for All Urban Consumers. "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.
3. The Maximum Price will be published on the first Monday of April and go into effect on June 1st.(b)Credit Transfers between Parties.(1) A regulated entity that wishes to sell or transfer credits ("the Seller") and a regulated entity that wishes to purchase or acquire a credit ("the Buyer") may enter into an agreement to transfer credits. Any such agreement must be fully documented in the LRT-CBTS pursuant to section 95487(b)(1)(B) through (F). (A)General Requirements for Credit Transfers. The Seller may transfer credits provided the number of credits to be transferred by the Seller does not exceed the number of total credits in the Seller's credit account defined as follows: Click here to view image
(B) The credit transfer request must identify the type of transaction agreement for which the transfer request is being submitted, selecting one of the following types: 1.Type 1 Transfer: Over-the-counter agreement for the sale or transfer of LCFS credits for which delivery will take place no more than 10 days from the date the parties enter into the transaction agreement.2.Type 2 Transfer: Over-the-counter agreement for the sale or transfer of LCFS credits for which delivery is to take place more than 10 days from the date the parties enter into the transaction agreement or that involve multiple transfers of LCFS credits over time.3.Type 3 Transfer: Agreements for the sale of LCFS credits through any contract arranged through a clearing service provider.(C)For Type 1 Transfer. Within 10 days from the date the parties enter into the credit transaction agreement, the Seller and the Buyer must initiate and complete the transfer request using the Credit Transfer Form (CTF) provided in the LRT-CBTS. The parties must provide:1.Date of Transaction Agreement. The date on which the Buyer and Seller enter into the credit transaction agreement;2. Names and the Federal Employer Identification Numbers (FEIN) of the Seller and the Buyer as registered in the LRT-CBTS;3. First name, last name, and contact information of the Seller and Buyer representative;4. The number of credits proposed to be transferred; and5. The price or equivalent value of the consideration (in U.S. dollars) per credit proposed for transfer, excluding any fees.(D)For Type 2 Transfer. Within 10 days from the date the parties enter into the credit transaction agreement, the Seller and the Buyer must report the following using the Credit Transfer Form (CTF) provided in the LRT-CBTS: 1.Date of Transaction Agreement. The date on which the Buyer and Seller enter into the credit transaction agreement;2. Names and the Federal Employer Identification Numbers (FEIN) of the Seller and the Buyer as registered in the LRT-CBTS;3. First name, last name, and contact information of the Seller and Buyer representative;4. If the agreement requires a single delivery of credits or multiple deliveries of credits. The Executive Officer may assign reference numbers for reporting future credit transfers under agreements for multiple deliveries of credits;5. The expected date of last credit delivery or the length of the agreement including the date by which all deliveries are to be completed;6. The total number of credits anticipated to be transferred under the agreement;7. The price per credit (in U.S. dollars) or the terms to determine the price for future credit transfer as per the agreement;8. If the agreement is terminated or amended prior to its full execution as provided in subsection 5. above, the parties must notify the Executive Officer within 10 days; and9. If the credit transfer is one of multiple deliveries under an agreement previously reported using a CTF, the parties must provide the reference number (if any) assigned by the Executive Officer.(E)For Type 3 Transfer. A credit transfer request submitted for an agreement executed through a clearing service provider must provide the following information:1. Identify the exchange through which the transaction is conducted;2. Date of close of trading for the contract;3. Identify the contract description code assigned by the exchange to the contract;4. Price at close of trading for the contract;5. The number of credits in the contract to be transferred; and6. Date of delivery of LCFS credits covered by the contract.(F) If the transaction agreement does not specify the price for LCFS credits, the Seller must provide a brief description of the pricing method for the full transaction inclusive of all products and value exchanged. The seller must also select one of the following options:1. The proposed transfer is to reflect an adjustment in CI value of fuel transacted between Seller and Buyer;2. The proposed transfer incorporates a credit trade along with the sale or purchase of other product, and does not specify a price or cost basis for the sale of the credits alone.(G)Recording a Credit Transfer. Upon receiving a fully-completed CTF, the Executive Officer shall, either:1. Process and approve the transfer request and update the account balances of the Seller and Buyer to reflect the credit transfer, provided the Executive Officer determines all required information was submitted, and it accurately reflects the parties' positions at the time of the proposed transfer; or2. Notify the parties that the proposed credit transfer is infeasible and identify the reasons for rejecting the transfer.(2)Facilitation of Credit Transfer. A Seller or Buyer may elect to use a third-party broker as defined in section 95481 to facilitate the transfer of credits. A broker cannot acquire credits. A broker who will document transfers in LRT-CBTS must register in the LRT-CBTS, and the Buyer, Seller, or both must document, using the LRT-CBTS, authorization for broker to act on their behalf. A broker may, with the consent of the parties, conduct a "blind transaction" where the Buyer of the credit does not know the identity of the Seller, and/or the Seller of the credit does not know the identity of the Buyer.(3)Correcting Credit Transfer Errors. A regulated entity is responsible for the accuracy of information submitted to the Executive Officer. If a regulated entity discovers an error in the information reported to the Executive Officer or recorded by the Executive Officer, the regulated entity must inform the Executive Officer in writing within five (5) days of the discovery and request a correction. Each submitted request is subject to Executive Officer review and approval. If the Executive Officer determines that the error occurred during the recording of the credit by Board staff, the Executive Officer will make the correction and no additional re-submissions are required.(c)Public Disclosure of Credit and Deficit Balances and Credit Transfer Information. (1) The Executive Officer shall, no less frequently than quarterly, provide to the public reports containing a summary of credit generation and transfer information including, but not limited to: (A) Total deficits and credits generated or incurred in the most recent quarter for which data are available, including information on the types and quantities of fuels used to generate credits.(B) Total deficits and credits generated or incurred in all previous quarters of the most recent year for which data are available, including information on the types and quantities of fuels used to generate credits.(C) Total credits in regulated entities' accounts and the total number of outstanding deficits carried over by regulated entities from a previous compliance year.(D) Information on the credits transferred during the most recent quarter for which data is available including the total number of credits transferred, the number of transfers, the number of parties making transfers, and the monthly average credit price for transfers that reported a price.(2) The Executive Officer shall provide reports, no less frequently than monthly, to regulated entities and the public containing information necessary or helpful to the functioning of a credit market. Such reports may include recent information on credit transfer volumes, credit prices and price trends, and other information determined by the Executive Officer to be of value to market participants and the public. The Executive Officer shall establish, and may periodically modify, a schedule for the routine release of these reports.(d)Prohibited Transactions. A trade involving, related to, or associated with any of the following is prohibited: (1) Any manipulative or deceptive device;(2) A corner or an attempt to corner the market for credits;(3) Fraud, or an attempt to defraud any other entity;(4) A false, misleading or inaccurate report concerning information or conditions that affects or tends to affect the price of a credit;(5) An application, report, statement, or document required to be filed pursuant to this subarticle which is false or misleading with respect to a material fact, or which omits to state a material fact necessary to make the contents therein not misleading. A fact is material if it is reasonably likely to influence a decision by a counterparty, the Executive Officer, the Board, or the Board's staff; or(6) Any trick, scheme, or artifice to falsify or conceal a material fact, including use of any false statements or representations, written or oral, or documents made by or provided to an entity through which transactions in credits are settled, or are cleared.(7) Upon investigation pursuant to section 95495, the Executive Officer may cancel or reverse a credit transfer if a credit transfer is determined to be a prohibited transaction as per subsection (1) through (6) above. The Executive Officer shall notify the parties and identify the reasons for cancelling or reversing a credit transfer.Cal. Code Regs. Tit. 17, § 95487
1. New section filed 1-12-2010; operative 1-12-2010 pursuant to Government Code section 11343.4 (Register 2010, No. 3).
2. Repealer and new section filed 11-16-2015; operative 1-1-2016 (Register 2015, No. 47).
3. Amendment filed 1-4-2019; operative 1-4-2019 pursuant to Government Code section 11343.4(b)(3) (Register 2019, No. 1).
4. Amendment of subsection (a)(2)(B) and new subsections (a)(2)(D)-(a)(2)(D)3. filed 5-27-2020; operative 7-1-2020 (Register 2020, No. 22). Note: Authority cited: Sections 38510, 38560, 38560.5, 38571, 38580, 39600, 39601 and 43018, Health and Safety Code; 42 U.S.C. section 7545; and Western Oil and Gas Ass'n v. Orange County Air Pollution Control District, 14 Cal.3d 411, 121 Cal.Rptr. 249 (1975). Reference: Sections 38501, 38510, 39515, 39516, 38571, 38580, 39000, 39001, 39002, 39003, 39515, 39516 and 43000, Health and Safety Code; Section 25000.5, Public Resources Code; and Western Oil and Gas Ass'n v. Orange County Air Pollution Control District, 14 Cal.3d 411, 121 Cal.Rptr. 249 (1975).
1. New section filed 1-12-2010; operative 1-12-2010 pursuant to Government Code section 11343.4 (Register 2010, No. 3).
2. Repealer and new section filed 11-16-2015; operative 1/1/2016 (Register 2015, No. 47).
3. Amendment filed 1-4-2019; operative 1/4/2019 pursuant to Government Code section 11343.4(b)(3) (Register 2019, No. 1).
4. Amendment of subsection (a)(2)(B) and new subsections (a)(2)(D)-(a)(2)(D)3. filed 5-27-2020; operative 7/1/2020 (Register 2020, No. 22).