Renewable Fuel Standard Update: EPA Announces 2009 RFS Targets
Beveridge & Diamond, P.C., November 19, 2008
The U.S. Environmental Protection Agency (EPA) announced on November 14, 2008 that the federal Renewable Fuel Standard (RFS) for sales or blending of renewable fuels for 2009 will be 10.21 percent. For a printable PDF of this article, click here.
2009 Targets Established
EPA is required by the Energy Independence and Security Act of 2007 (EISA) to establish mandatory levels of biofuels (such as ethanol) and biodiesel in the Nation’s fuel supply as part of an overall national policy to promote renewable fuel sources, reductions in greenhouse gas (GHG) emissions and energy independence (see Beveridge & Diamond, P.C. “Renewable Fuel Program Standard Update,” available online at: http://www.bdlaw.com/news-news-270.html). EPA’s November 14 announcement comes in advance of more comprehensive implementing changes to the RFS program required by EISA (known as “RFS2”) currently under development by EPA. The November 14 notice provides some new information about the anticipated RFS2 rules and briefly discusses certain self-implementing EISA requirements for 2009 - including EISA’s 20% GHG lifecycle reduction requirement - that are not addressed by EPA’s existing RFS regulations.
Companies with questions about their obligations under the RFS and the impact of the 2009 standard, or seeking more information about EPA’s forthcoming Notice of Proposed Rulemaking (NPR) and the continuing controversy over the Agency’s implementation of the EISA changes, are invited to contact David M. (“Max”) Williamson at (202) 789-6084 (firstname.lastname@example.org) or Alan J. Sachs at (410) 230-1345 (email@example.com).
The RFS Program
Under the RFS program, EPA must set annual benchmarks representing the amount of renewable fuel that must be used by each gasoline refiner, blender (other than oxygenate blenders), or importer (called “obligated parties”). The RFS program includes registration, recordkeeping and reporting requirements for all renewable fuel producers and obligated parties, and established a trading market in renewable fuel credits, known as Renewable Identification Numbers (RINs). For more information about the RFS program, please see Beveridge & Diamond, P.C. update dated February 4, 2008, “Renewable Fuel Standard Program Update,” available online at http://www.bdlaw.com/news-news-270.html.
EPA calculates the annual RFS by dividing the volume of renewable fuel required by EISA to be blended into gasoline for the relevant year by the volume of gasoline projected to be consumed in that year according to the Energy Information Administration (EIA). According to EPA’s notice, which will be published in the Federal Register later this month, the 2009 standard is intended to result in the use of 11.1 billion gallons of renewable fuel.
Implementation of RFS2
Because EPA has not yet promulgated implementing rules for the RFS2 program, for the 2009 compliance period, obligated parties will continue to be subject to EPA’s existing RFS regulations. However, EPA’s November 14 notice describes several changes to the program that will require attention during the 2009 compliance period.
2009 Biomass-based Diesel Standard
EISA specifically requires use of 0.5 billion gallons of biomass-based diesel in 2009. To address this requirement, EPA states that it will not establish a target for 2009 but will increase the 2010 biomass-based diesel requirement by 0.5 billion gallons while allowing 2009 biodiesel and renewable diesel RINs to be used to meet this combined 2009/2010 requirement.
Although obligated parties will not need to demonstrate compliance with the combined biomass-based diesel standard until the end of the 2010 compliance period, EPA emphasizes that it would “behoove [obligated parties] to acquire the necessary RINs representing biodiesel and renewable diesel in 2009 in preparation for their 2010 compliance demonstration.” EPA also warns that obligated parties delaying their efforts to acquire these RINs until 2010 “could find that they would be unable to acquire a sufficient number for compliance purposes.”
2009 Greenhouse Gas Lifecycle Reduction Requirement
EISA mandates for calendar year 2009 that any renewable fuel produced from facilities that commence construction after December 2007 achieve at least a 20 percent reduction in lifecycle GHG emissions compared to baseline lifecycle GHG emissions. However, for 2008 and 2009, EISA also provides that any ethanol plant that is fired with natural gas, biomass, or any combination thereof, will automatically be deemed to be in compliance with the 20 percent lifecycle GHG reduction requirement.
While noting EISA’s ambiguity regarding application of the GHG reduction requirement in 2009 prior to issuance of the RFS2 regulations, EPA’s November 14 notices states that the agency will not interpret these provisions at this time because it believes there will in fact be no fuel sold in 2009 from a facility constructed after December 2007 that is not fired with natural gas, biomass, or a combination thereof (in other words, all renewable fuel sold in 2009 will be deemed in compliance with the GHG reduction requirement pursuant to EISA). EPA states that it will interpret application of the provisions in 2009 only if it “learns of such a fuel being sold.”