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

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Another possible approach to RIN life would be to interpret the Energy Act's 12month credit life provision as applying retrospectively, not prospectively. Under this approach, the 12-month timeframe in the Act would be interpreted to refer to the calendar year within which a credit was generated. If excess RINs were deemed to be such on December 31, then under this alternative approach no RINs could be used for compliance purposes beyond the year in which they originally came into existence. However, the Act explicitly indicates that obligated parties may either use the credits they have generated or transfer them. For a party to be able to use credits generated, such credit use must necessarily occur in a compliance year other than the one in which the credit was generated. Thus we believe that it is appropriate for all RINs to be valid for the year in which they were generated and the following calendar year. In comparison to a single-year valid life for RINs, our proposed approach provides some additional compliance flexibility to obligated parties as they make efforts to acquire sufficient RINs to meet their RVOs each year. This flexibility will have the effect of keeping fuel costs to a minimum. We recognize that the language of the Act regarding credit valid life is not unequivocal. However, we believe that an interpretation leading to a valid life of one year after the year in which the RIN was generated is most consistent with the program as a whole. The record of the development of this legislation does not provide a clear indication to the contrary. In fact, while some stakeholders have argued that the Energy Act could have been written to explicitly allow a valid life of multiple years if that had been Congress' intent, we believe it could likewise have been written to explicitly limit the valid life to the year in which the renewable fuel was produced if that had been its clear intent. Therefore, the interpretation of the valid life language in the Act must be established in the context of the statutory requirements for the full RFS program and the practical implications of its implementation. One possible objection to our proposed approach is that the use of RINs generated in one compliance period to satisfy obligations in a subsequent compliance period could result in less renewable fuel used in a given year than is set forth in the statute. However, the language in the Act shows that Congress clearly intended a credit program that provided a degree of implementation flexibility. For instance, the deficit carryover provision allows any obligated party to fail to meet its RVO in one year if it meets the deficit and its RVO in the next year. If many obligated parties took advantage of this provision, it could result in the nationwide total volume obligation for a particular calendar year not being met. In a similar fashion, the statutory requirement that every gallon of cellulosic biomass ethanol be treated as 2.5 gallons for the purposes of compliance means that the annually required volumes of renewable fuel could be met in part by virtual, rather than actual, volumes. Finally, the calculation of the renewable fuel standard is based on projected nationwide gasoline volumes provided by EIA (see Section III.A). If the projected gasoline volume falls short of the actual gasoline volume in a given year, the standard will fail to create the demand for the full renewable fuel volume required by the Act for that year. The Act contains no provision for correcting for underestimated gasoline volumes. - 74 -
We request comment on the valid life of RINs, including our proposed approach in which RINs would be valid for the year generated or the following year, and the alternative approaches in which RINs would be valid for more or less time than under our proposal. c. Cap On RIN Use To Address Rollover As described in Section III.D.3.b above, we are proposing that RINs be valid for compliance purposes for the calendar year in which they were generated or the following year. We believe that this approach is most consistent with the Act's prescription that credits be valid for compliance purposes for 12 months as of the date of generation. Our proposed approach is intended to address both the risk taken by producers expecting a guaranteed demand to cover their expanded production capacity investments and the risk taken by obligated parties who need a guaranteed supply in order to meet their regulatory obligations under this program. However, the use of previous year RINs to meet current year compliance obligations does create an opportunity for effectively circumventing the valid life limit for RINs. This can occur in situations wherein the total number of RINs generated each year for a number of years in a row exceeds the number of RINs required under the RFS program for those years. The example below illustrates the issue. Required under RFS α Table III.D.3.c-1 Example of RIN rollover issue (billion RINs) Available RINs Compliance Determination RINs generated β Excess Previous Year RINs Additional RINs needed New excess RINs generated 2007 4.7 5.2 0.5 0.0 4.7 0.5 2008 5.4 6.0 0.6 0.5 4.9 1.1 2009 6.1 6.9 0.8 1.1 5.0 1.9 α Equivalent to the required volumes shown in Table I.B-1 β One possible production volume scenario based on EIA projections in their Annual Energy Outlook 2006 In this example, there are 0.5 billion more RINs available for compliance year 2007 than are needed to comply with the RFS program requirements. Since these RINs are not used in the year in which they are generated (2007), they can be used for compliance purposes in the following year (2008). If they are not used in 2008, they will expire. In 2008, 0.6 billion more RINs come into existence than are needed to meet the 2008 requirements. This should mean that there are 0.6 billion more RINs available than are needed to comply with the RFS program requirements for 2008, and thus 0.6 billion RINs should be carried into 2009. However, since there are also 0.5 billion RINs available from the previous year which can be used for compliance purposes in 2008, this permits the generation of 0.5 new excess RINs in 2008 if all the 2007 RINs are used to demonstrate compliance in 2008. Thus there are in fact 1.1 billion excess RINs generated in 2008 rather than only 0.6 billion, and they can all be used for compliance purposes in 2009. In summary, the excess RINs from 2007 were used to generate new excess RINs in 2008, and in effect - 75 -
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The Administrator signed the follow
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Ave., NW, Washington DC. This Docke
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Table of contents: I. Background A.
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C. Requirements for Producers and I
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G. Executive Order 13045: Protectio
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The increased use of renewable fuel
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establish the applicable national v
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Today's proposal outlines the full
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enewable fuel feedstock market pric
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Unlike VOC and NOx, emissions of CO
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These renewable feedstocks are then
Page 23 and 24: 5. Potential Water Quality Impacts
Page 25 and 26: enewable fuel volume which each par
Page 27 and 28: certain volume of renewable fuel. E
Page 29 and 30: est practices would have the option
Page 31 and 32: As stated, the renewable fuel stand
Page 33 and 34: enewable fuel volumes in the calcul
Page 35 and 36: For illustrative purposes, we have
Page 37 and 38: These credit provisions have meanin
Page 39 and 40: Stdi = The RFS program standard for
Page 41 and 42: gasoline. The Act is unclear on whe
Page 43 and 44: . Ethanol Made From Any Feedstock I
Page 45 and 46: generate thermal energy used to pro
Page 47 and 48: animal wastes, including poultry fa
Page 49 and 50: limit this program solely to a stra
Page 51 and 52: presence of the denaturant. For ins
Page 53 and 54: First, doing so could create an inc
Page 55 and 56: For purposes of this preamble, the
Page 57 and 58: capability for all of the small ref
Page 59 and 60: trading program, without any per ga
Page 61 and 62: obligated parties. However, there i
Page 63 and 64: particular importance for 2013 and
Page 65 and 66: have to significantly change their
Page 67 and 68: The D code would identify cellulosi
Page 69 and 70: Another case in which a RIN may not
Page 71 and 72: Section IV. In the context of demon
Page 73: equired volumes shown in Table I.B-
Page 77 and 78: e used for current year compliance.
Page 79 and 80: equirements by roughly 10 to 30 per
Page 81 and 82: 4. Provisions For Exporters Of Rene
Page 83 and 84: Previous-year RINs: RINs that came
Page 85 and 86: a. Responsibilities Of Renewable Fu
Page 87 and 88: another, in electronic or paper for
Page 89 and 90: e a one-to-one correspondence betwe
Page 91 and 92: Parent batch Actual volume (gal) Ba
Page 93 and 94: should also have the right to separ
Page 95 and 96: 3. Distribution Of Separated RINs O
Page 97 and 98: obligated parties to exercise marke
Page 99 and 100: Our proposed program is designed to
Page 101 and 102: As discussed in Section III.D, it i
Page 103 and 104: additional enforcement burdens plac
Page 105 and 106: B. Requirements for Obligated Parti
Page 107 and 108: fuel and containing identifying inf
Page 109 and 110: We request comment on our proposed
Page 111 and 112: We also request comment on our prop
Page 113 and 114: The refiner or importer would be li
Page 115 and 116: Plant Feedstock Corn a Table VI.A.1
Page 117 and 118: Leading the Midwest in ethanol prod
Page 119 and 120: EPA forecasts ethanol production to
Page 121 and 122: As shown in Table VI.A.2-1 and Figu
Page 123 and 124: 3. Current Ethanol and MTBE Consump
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Oxygenate Use (Bgal) 4.5 4.0 3.5 3.
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change from the 2004 base case. 53
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per gallon to biodiesel produced fr
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ased on the assumption that the ble
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Modifications to the rail, barge, t
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other waste materials as discussed
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elatively small fraction of the tot
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production costs using prices for s
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the capital cost of making the nece
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information on biodiesel freight co
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For further details on RVP reductio
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assuming only that blending of etha
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costs). At a $70 per barrel crude o
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gasoline use scenarios will cost th
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the incentive to blend in ethanol b
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supporting this rulemaking. We hope
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We base our estimates of fuel quali
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Table VIII.A.1.b-2 Effect of MTBE a
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pre-1998 model year onroad diesel e
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1. Primary Analysis The national em
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Table VIII.B.1-4 Annual Emissions N
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RFG due to the absence of an RVP wa
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increase in ambient ozone levels is
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developing a model of secondary org
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IX. Impacts On Fossil Fuel Consumpt
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intended to help fuel producers est
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efficiency and to reduce air emissi
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combined those displacement indexes
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3. Displacement Indexes (DI) The di
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Table IX.C.1-1 Fossil fuel impacts
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as on the exports of agricultural p
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which may change in response to an
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X. Agricultural Sector Economic Imp
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XI. Public Participation We request
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ways to comply with any previously
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small refiner under this proposal.
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meet these criteria to be considere
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“economically significant” as d
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40 CFR Part 80 is proposed to be am
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(b) Renewable Fuel Standard for 200
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(2) The term “Renewable fuel” i
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RFStdi = Renewable Fuel Standard in
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a party’s renewable volume obliga
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(a) YYYY is the calendar year in wh
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(ii) The value for EEEEEE in an ext
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(2) A deficit is calculated accordi
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(a) (1) Any party that exports any
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(e) If a refiner is complying on an
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calendar year; however, disqualific
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§80.76, if such information has no
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(1) A summary report of the annual
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(4) Reports shall be submitted on f
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(1) Fail to acquire sufficient RINs
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(b) The following attest procedures
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(B) That the RFS-FRGAS remained seg
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EPA employees or EPA contractors, f
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(iv) Determine the date and time th
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(ii) Be licensed as a Certified Pub
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