Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

have to significantly change their business or production practices to take greater control of
ethanol blending and, therefore, the mechanism for compliance with the RFS program. For
instance, a refiner could establish a contract with an oxygenate blender, securing the rights to
the credits that oxygenate blender creates. A refiner might also decide to take on more
blending responsibilities itself. However, these approaches would run counter to the normal
business practices that keep fuel costs to a minimum, and would thus have a tendency to
increase fuel costs.
Third, tracking renewable fuel volumes to identify the date, place, and volume of
blending into gasoline would maximize the number of parties involved, overly
complicating the compliance system. There are approximately 1200 blenders in the U.S.
who blend ethanol into gasoline, in addition to those that blend biodiesel into
conventional diesel fuel. Many of these parties are small businesses that have not been
regulated in an EPA fuel program before. Enforcement efforts would necessarily be
placed on them, imposing upon them the primary burden of accurately documenting the
volumes of renewable fuel that are blended into gasoline even though they are not
obligated for meeting the standard. In contrast, under our proposed program blenders
would only need to keep records of RINs acquired with batches. It is our expectation that
in most cases obligated parties will separate the RINs from batches before those batches
are transferred to blenders. Therefore, blenders will only have to keep records of RINs
for a fraction of the renewable fuel produced.
Fourth, a focus on the point of blending would not address renewable fuels that need
not be blended into gasoline or diesel. For example, although biodiesel 28 is generally
blended into conventional diesel before being used as fuel, it can be used in its neat form
(B100). If volumes of renewable fuel were counted only when blending into conventional
fuel occurred, then B100 could never be claimed by an obligated party for RFS compliance
purposes. The same would be true of other renewable fuels which, although not produced in
significant quantities today, could play a more substantial role in the renewable fuels market
in the future. Examples of these other unblended renewable fuels could include renewable
diesel made by hydrotreating plant oils instead of transesterifying them, or a renewable
gasoline made from a Fischer-Tropsch process applied to biogas.
Finally, a focus on the point of blending would not permit cellulose biomass ethanol
to be distinguished from other forms of ethanol. Since the Act requires that 250 million
gallons of cellulosic biomass ethanol be produced starting in 2013, this alternative approach
would require tracking of batches of renewable fuel at the producer level.
In a blender-based approach, then, special exceptions would need to be developed in
order for these neat fuels to be available for RFS program compliance purposes. For
instance, a system of measuring and tracking neat renewable fuel volumes at the point of
production would likely be necessary. This would be no different from a RIN-based program
for such fuels.
28
Mono-alkyl esters made from plant or animal oils or fats, and which have been registered with the EPA
for use in highway motor vehicles.
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