In 2005, the Energy Policy Act introduced the Renewable Fuel Standard (RFS) for petroleum fuels to the American Transportation Industry. These standards stipulate the percentage of petroleum fuel that needs to be replaced with renewable fuel sources, such as ethanol. Amendments since this date have expanded the mandate and scope of the RFS to include regulations for petroleum vendors.
Under the Clean Air Act of 2010, the Renewable Fuel Standard (RFS2) program was legislated to update the RFS1 program set in 2007. The goal of RFS2 is to further reduce greenhouse gas emissions, reduce petroleum imports and assist in growing the renewable fuels market.
As the sector continues to develop and expand, we will see new rules and regulations added and amended to meet government and industry standards and objectives. The following summarizes key updates for 2014:New Pathway Qualifiers
- Compressed natural gas, liquefied natural gas and electricity have now qualified under the cellulosic and advanced bio-fuels category.
- These “new” fuels must be produced from landfill biogas, municipal wastewater treatment (MSW) facility digesters, MSW separated digesters and agricultural digesters.
- They will also qualify for cellulosic Renewable Identification Numbers (RINs) which represent the volume of renewable fuel, tracking the type and quantity being produced, imported or exported.
- Producers must record specific types and quantities of crop residue being used as renewable fuel feedstock during production in their registration report to the EPA.
- Small refineries are now defined so as to meet a crude throughput threshold of 75,000 bpd in the most current calendar year prior to applying for hardship.
- Threshold for smaller scale blenders delegating RINs responsibilities is now 250,000 gallons instead of 125,000.
- The EPA may remove a company’s registration if it has not reported any activity in the EPA’s Moderated Transaction System within a two-year period.
- Use of “nameplate capacity” for registration of production facilities not claiming exemption from the 20 percent GHG reduction limit.
- Clarification of applicable penalties under the RFS program.
- Number of RINs that may be issued for fuel produced from varying cellulose feedstock.
The EPA will also be lowering the number of samples required under the Ultra-low Sulphur Diesel Survey program. This new ruling is expected to reduce industry costs and will also make further changes to the E15 misfuelling mitigation regulations.Impacts On the Fuel Industry
While these latest regulation updates will have some impact, the most significant implications stem from that which has not been addressed or clarified by the EPA.
- RFS volume requirements for 2014 have yet to be established – This leaves producers guessing the amount of ethanol to be blended into gasoline. It may also impact consumers if refiners’ compliance costs rise and they are unable to meet demand.
- Production of advanced bio-fuel is lacking – The rule does not address low outputs in the domestic market and how requirements will be met nor indicate the volume of cellulosic fuel that will be available from the new pathway qualifiers.
- Discrepancy in definition of “cellulosic biofuel” – The EPA interprets the Clean Air Act’s definition of cellulosic biofuel as “ambiguous”. Therefore, fuels of 75 per cent cellulosic content will receive 100 per cent of a RIN, but those with 74 per cent will only receive 74 per cent of a RIN.
- Lowering EPA volume requirements – Biofuel producers are concerned that the shift will cause huge financial losses, plant closures and layoffs, greater dependence on fossil fuels and most importantly, environmental impact.
- Blend wall of ethanol exceeding 10 per cent – Refiners are anxious that blends of up to 15 percent will affect fuel supply and cause harm for consumers with unequipped vehicles.
There is much to be resolved as the industries work with regulators to find balance in co-existing. Be sure to stay connected with your fuel distributor for updates as they develop. They will have current market information and will let you know what affects you. That is one rule that won’t change.