September 2010 Compliance News

 

In 2010, we saw renewable fuels get on national policy agendas in several countries and regions across the world. The USA, the EU, India, Brazil, Argentina and Canada now have mandates in place for renewable fuel use. These policies spur global demand, and offer much needed support to the relatively new industry. They also bring with them a myriad of rules and regulations as each country and region develops a parallel system to monitor the actual impact of renewable fuels in reducing GHG emissions and dependency on fossil fuels. In this issue, we begin looking at this trend by giving very brief summaries of the two regulations closest to US producers who are already regulated by RFS2- California’s Low Carbon Fuel Standards and the Canadian Renewable Fuel Regulations.

In This Issue:

  • K1 RINs at the End of the Quarter
  • Canadian Renewable Fuel Regulations
  • California’s Low Carbon Fuel Standards
  • RFS2 Reports

End of Quarter K1 RINs

Per Part 80.1428(a)(5) of the Renewable Fuel Stanadards, at the end of each quarter, all parties must reconcile their K1 RIN holdings to meet the following criteria:

Number of K1 RINs ≤ 2.5 * Fuel gallons in inventory

With September 30 just around the corner, it is time to check whether you are compliant under this requirement. If not, you can attach some of your extra K1 RINs to any gallon of fuel that you are selling and pass the RINs downstream to a customer who has room for them provided you attach a maximum of 2.5 RINs per wet gallon.

How do producers end up with K1 RIN in the first place? This happens when a downstream customer refuses them. Blenders do have the right to refuse RINs and not participate in the rigorous record-keeping and reporting requirements of RFS2. When that happens, producers can keep those RINs provided they have another customer who wants them.

For biodiesel RINs which are generated at a ratio of 1.5 per wet gallon, the maximum of 2.5 RINs that can be attached to a gallon means for every two wet gallons for which RINs are refused, there must be another customer buying three wet gallons and willing to take them. Otherwise, the producer is going to accumulate K1 RINs faster than they are being transmitted downstream.

Contact us with questions related to your RIN management and RIN marketing needs at 515.309.1279 or info@ecoengineers.us.

Canadian Renewable Fuel Regulations

The big news for September has been Canada releasing a national renewable fuel policy on September 1, which goes into effect on December 15, 2010. The Canadian standards create a mandate for a 5% renewable fuel content in the total volume of gasoline produced and imported. A 2% renewable fuel requirement for diesel fuel and heating distillate oil is included in the standards, but its enforcement is suspended until technical feasibility studies on the performance of biodiesel under Canadian conditions are completed.

The regulations admit some level of imports, primarily from the United States, would be needed during the first four years of the regulations’ coming into force while the domestic production capacity expands to meet the mandate.

Regulated parties under the Canadian standards are producers and importers of gasoline, diesel fuel and heating distillate oil. And they have to show compliance by collecting credits corresponding to each liter of renewable fuel mixed into the transportation fuel mix. Foreign producers are not expected to register their facilities and pathways with the Canadian regulators.

Entities who blend renewable fuel and who sell or use neat renewable fuel are also allowed to generate credits. However, their participation is voluntary and they are incentivized by the potential value of the credits in ensuring compliance.

The full regulations can be found at here. EcoEngineers is actively monitoring the implementation of Canadian national regulations and provincial regulations. For assistance with regulatory issues relating to exports to Canada or imports from Canada, please contact us at 515.309.1279 or info@ecoengineers.us.



California’s Low Carbon Fuel Standards

Provided none of the several lawsuits against it prevail, California Air Resource Board’s (CARB) Low Carbon Fuel Standards (LCFS) will go into full effect on January 1, 2011. LCFS is based on a “well-to-wheel” model that measures the GHG impact of biomass cultivation, biofuel production, transportation and distribution and assigns a Carbon Intensity value to renewable fuels. The goal of LCFS is to achieve a 10% reduction in average Carbon Intensity of transportation fuel used in California by 2020.

Production facilities have to register with CARB and each facility will be assigned a default Carbon Intensity (CI) value for their fuel. LCFS has its own credit system based on the CI of the fuels used in the transportation fuel mix and credits can be traded outside the system and ownership transferred within the system – much like the EPA’s RIN program. However, LCFS credits and RINs will not be interchangeable due to different standards for measuring GHG reduction.

Midwest corn ethanol -dry mill, natural gas- has a CI value between 90.1 and 98.4 (wet DGS vs dry DGS) and gasoline (CARBOB) has a total CI value of 95.86. LCFS will prevent much of Midwest ethanol from being sold in California since there won’t be much reduction in average CI value by its addition into the fuel mix.

Biodiesel made from Midwest soybeans has a CI value of 83.25 and biodiesel made from waste oils have a CI value between 11.76 and 15.84. ULSD has a CI value of 94.71. Domestic biodiesel production will be viable for credit generation under LCFS.

Soy Methyl Esters from Midwest soybeans will meet LCFS requirements provided they are blended at a minimum B5 level for the first two years and then at higher blends. This is because the average Carbon Intensity for a B5 blend of SME and ULSD will be 94.14. The reduction in CI is progressively more demanding and after 2012 it falls below 94.

For more information on LCFS, help with facility registration or data integration for RFS and LCFS reporting, please contact us at 515.309.1279 or info@ecoengineers.us.

RFS2 Reports

New reports that are due under RFS2 are being populated on this website – http://www.epa.gov/otaq/regs/fuels/rfsforms.htm. For all RIN activity with a transaction date after July 1, 2010, parties must use forms RFS0101, RFS0201, RFS0600 and RFS0700.

With one full quarter behind us on September 30, the first RFS2 reports will be due on November 30, 2010. In our next issue, we will be taking a close look at all the required RFS2 reports.

Contact Us:
515.309.1279
info@ecoengineers.us

 

Ecoengineers:

We provide a full suite of turnkey solutions to meet the compliance needs of renewable fuel producers, including RIN generation and reporting; RFS2 registrations; on-site verification and certification; regulatory consulting on national and international fuel standards; and RIN Marketing. Our cost-effective solutions address business decisions faced by renewable fuel producers and associated marketers. Our management team has over 75 years of combined experience in assisting industry with regulatory compliance.

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