(2)(a) The department shall hold a credit clearance market for any compliance period in which at least one regulated party reports that the regulated party has a net deficit balance at the end of the compliance period, after retirement of all credits held by the regulated party, that is greater than a small deficit. A regulated party described by this paragraph is required to participate in the credit clearance market.

(b) If a regulated party has a small deficit at the end of a compliance period, the regulated party shall notify the department that it will achieve compliance with the low carbon fuel standard during the compliance period by either:

(A) Participating in a credit clearance market; or

(B) Carrying forward the small deficit.

(3) For purposes of administering a credit clearance market required by this section, the department shall:

(a) Allow any regulated party, credit generator or credit aggregator that holds excess credits at the end of a compliance period to voluntarily participate in the credit clearance market as a seller by pledging a specified number of credits for sale in the market.

(b) Require each regulated party participating in the credit clearance market as a purchaser of credits to:

(A) Have retired all credits in the party’s possession prior to participating in the credit clearance market; and

(B) Purchase the specified number of the total pledged credits that the department has determined are that party’s pro rata share of the pledged credits.

(c) Require all sellers to:

(A) Agree to sell pledged credits at a price no higher than a maximum price for credits;

(B) Accept all offers to purchase pledged credits at the maximum price for credits; and

(C) Agree to withhold any pledged credits from sale outside the credit clearance market until the credit clearance market is closed.

(4)(a) The commission shall set the maximum price for credits in a credit clearance market, which may not exceed $200 for 2018.

(b) For 2019 and subsequent years, the maximum price for credits may exceed $200, but only to the extent that a greater maximum price for credits is necessary to annually adjust for inflation, beginning on January 1, 2019, pursuant to the increase, if any, from the preceding calendar year in the Consumer Price Index for All Urban Consumers, West Region (All Items), as published by the Bureau of Labor Statistics of the United States Department of Labor.

(5) A regulated party that has a net deficit balance after the close of a credit clearance market:

(a) Must carry over the remaining deficits into the next compliance period; and

(b) May not be subject to interest greater than five percent, penalties or assertions of noncompliance that accrue based on the carryover of deficits under this subsection.

(6) If a regulated party has been required under subsection (2) of this section to participate as a purchaser in two consecutive credit clearance markets and continues to have a net deficit balance after the close of the second consecutive credit clearance market, the Department of Environmental Quality shall complete, no later than two months after the close of the second credit clearance market, an analysis of the root cause of the inability of the regulated party to retire the remaining deficits. The department may recommend and implement any remedy that the department determines is necessary to address the root cause identified in the analysis, including but not limited to issuing a deferral, provided that the remedy implemented does not:

(a) Require the regulated party to purchase credits for an amount that exceeds the maximum price for credits in the most recent credit clearance market; or

(b) Compel a person to sell credits.

(7) If credits sold in a credit clearance market are subsequently invalidated as a result of fraud or any other form of noncompliance on the part of the generator of the credit, the department may not pursue civil penalties against, or require credit replacement by, the regulated party that purchased the credits unless the regulated party was a party to the fraud or other form of noncompliance.

(8) The department may not disclose the deficit balances or pro rata share purchase requirements of a regulated party that participates in the credit clearance market. [2017 c.750 §166; 2019 c.57 §25]