Posts Tagged ‘Renewable Fuel Standard’

RFS2 White Paper Now Available

The Energy Independence and Security Act of 2007 (EISA) mandated the use of renewable fuels from four different categories of fuels, each with their own standard, and each based on a performance threshold measured in terms of Greenhouse Gas (GHG) reductions. The RFS2 regulations contain the rules that industry will abide by in meeting these requirements. This new White Paper will help you make sense of it all.

RINSTAR® Members should review this paper before our next Webinar


Download RFS2 White Paper

To say the RFS2 rule is complex would be a huge understatement. In reality this rule is much more complex than RFS1. Recognizing this, and the fact that thousands of companies throughout the industry will need to understand how the new rules impact their businesses, I teamed up with Graham Noyes from the law firm Stoel Rives to collaborate on this White Paper. The title of the paper is America Advances to Performance Based Biofuels - The Advanced Renewable Fuel Standard / RFS2. And here is the best part; we are presently making it available to you for FREE. All you need to do is sign up in the space provide on this page. Once you sign up you will receive an e-mail in your inbox with a link to download the document. We all have a lot of ground to cover between now and July 1, 2010 and I just thought it would be a good idea to share some of this basic foundational work with you. If you have questions or if we can be of assistance with your own efforts, please let me know. It would also be great to learn where you heard about the White Paper - so take a second and leave a comment and let me know where you heard about it and what you think.

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EPA Feedback Survey

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Stakeholder Survey Results

To following graphs summarize the results from a recent stakeholder feedback survey.  These results are being shared with EPA in an effort to assist with proposed changes to the Renewable Fuel Standard.

Let EPA know what you think!
WEIGH IN WITH YOUR OWN OPINION

Need More Details?
Complete Details Are Available Here!

Let EPA know what you think!
WEIGH IN WITH YOUR OWN OPINION

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Educational Series: A Recap of the RFS & RINS

RFS Educational Series Briefing No. 11: A Recap of the RFS & RINS

Written by Clayton McMartin for Televent DTN

Profitability of today’s fuel supplier is impacted by how well they understand the regulations that they operate within. Recognizing this, we have provided a series of briefings to help you better understand the regulatory arena you are operating in today, and that you face tomorrow.

Over the past several weeks we have covered several topics related to the renewable fuel standard (RFS) and the credit known as the Renewable Identification Number (RIN). In this wrap-up briefing we will recap the key points and hopefully tie many of these concepts and principals together, giving you a better understanding of how to profit from your new found knowledge.

In Briefing #1 we started with an explanation of what the renewable fuel standard (RFS) is and learned that it is a mandate for the use of renewable fuels.

Briefing #2 then explained the principal behind the 38-digit Renewable Identification Number (RIN) and the important information that can be found in those digits.

In Briefing #3 we started at the beginning of the supply chain to learn that RINs come from producers and importers of renewable fuels. We then focused our attention to the end of the supply chain in Briefing #4 to see how obligated parties would use RINs to satisfy their obligations.

Since in reality, renewable fuel often moves through numerous parties before reaching the end of the supply chain, we moved our attention in Briefing #5 to how RINs are tracked. We saw how the RIN is carried from one party to the next through the supply chain and how EPA utilizes this information to assure compliance.

Since RINs can exist in two different states, either assigned to physical fuel or separated from fuel, we covered this important subject in Briefing #6. We covered the criteria necessary to separate RINs from the fuel and therefore make them a tradable paper credit.

In Briefing #7, Briefing #8 and Briefing #9 we focused more on the market for RINs, investigating who would want to own RINs for investment purposes, what vintage year RINs are valid and their limitations. And then we moved on finally to the market factors that influence RIN prices.

In our most recent Briefing #10, we took our first high level look at how the advanced renewable fuel standard (RFS2) came to be and how it will bring even more complexities and opportunities to those in the motor fuel industry.

As you recognized, the involvement of government in your business is becoming more prevalent with each coming year. Regulatory changes like we have seen with the renewable fuel standards present challenges but also opportunities for those who take the initiative to learn about the factors impacting their business. These fuel standards are a part of business today and will be well into the foreseeable future.

Click here to download a PDF of Educational Series Briefing No 11: A Recap of the RFS & RINS.

Past briefings are available by clicking here.

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Educational Series: The Proposed Advanced Fuel Standard (RFS2)

RFS Educational Series Briefing No. 10: The Proposed Advanced Fuel Standard

Written by Clayton McMartin for Televent DTN

Congress passed the Energy Independence and Security Act (EISA) in December of 2007 and as President Bush signed the ACT a new and advanced renewable fuel standard started what has turned out to be a long road to the marketplace. In fact, the regulatory process, where EPA codifies the Congressional Act into regulations, is over 2 years behind the deadline established through EISA.

The tardiness of the advance renewable fuel standard (RFS2) can be attributed to numerous factors, including such items as a Presidential election, special interest group lobbying, indirect land use assessments, and overall complexity of the new laws. Regardless of the delays, industry still anticipates an eventual RFS2 and will therefore need to be prepared for the changes.

The high level changes brought about by RFS2 when compared to the original RFS1 are:

  • Under RFS2 mandated volumes apply to both gasoline and diesel used in both on-road and off-road application in the United States. RFS1 obligations apply only to on-road gasoline.
  • RFS2 mandates increased dramatically over RFS1, 36 Billion by 2022 gallons/year vs. 7.5 BGY by 2012.
  • RFS2 provides for “carve outs” for specific fuel types, namely biodiesel and cellulosic biofuels.
  • RFS1 places a 15 BGY cap on the mandates for corn starch derived ethanol.
  • RFS2 addresses greenhouse gas (GHG) contribution by establishing four categories of fuels and requiring threshold performance requirements to be met. RFS1 did not address GHG reduction.
  • RFS2 places restrictions on land use in an attempt to address the food vs. fuel argument. These restrictions require renewable fuel producers to qualify their feedstocks each time they generate RINs.

This list represents the highest level of changes brought about by RFS2. Although not comprehensive, these basic changes should provide a good indication to the change in complexity that the industry faces as the legislators and the regulators become more involved with the daily business of transportation fuels.

To illustrate just one area of the new RFS2 program, consider the obligated party. You may recall from Briefing #4 How are RINs Used? that it is primarily refiners who would have a use for RINs. Under RFS2 there are 4 categories of renewable fuels, each with their own distinct RIN type. What this means to the obligated party is that they will now have to meet 4 different standards instead of just one renewable fuel standard as today. They will need to acquire and balance 4 different RIN types to be assured of compliance with the regulations. As you can see, the added degrees of freedom bring with them at least an order of magnitude in complexity.

Click here to download a PDF of Educational Series Briefing No 10: The Proposed Advanced Fuel Standard.

Past briefings are available by clicking here.

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Educational Series: Market Factors Influencing RIN Values

RFS Educational Series Briefing No. 9: Market Factors Influencing RIN Values

Written by Clayton McMartin for Televent DTN

RIN values are affected by a number of factors, ranging from the current year’s mandate of renewable fuel to the level of overall confidence in the marketplace. The following would represent a partial list of contributing factors to the value of a RIN:

  • Transportation cost – The cost to transport ethanol and other biofuels play a key role in the overall RIN value.
  • RFS mandate – The mandated level of renewable fuel, the Renewable Fuel Standard, for the specific year establishes the demand and therefore influences price.
  • Waiver petitions and other uncertainties that await EPA’s ruling have proven to have a dramatic impact on RIN prices.
  • Vintage year – Current vintage year RINs will have more value than RINs from the prior year due to limitations on the use of prior year RINs.
  • Blending Margins – The net economic margin considering petroleum product price, biofuel price, and other blending tax credits has a direct impact on the availability of RINs and consequently the price.
  • RIN failures – Invalid RINs in the market place result in oversupply of RINs and consequently drive the price of RINs down and with it the demand for physical product.
  • Deadlines – The year end deadline and the overall readiness by industry can result in last hour panic and a resulting price increase.

Since the inception of the RFS program, RIN prices have seen a dramatic increase from when RIN trading originally started on Sept. 1, 2007. RIN credits originally traded at 0.25 cents each – primarily because industry did not initially understand the program. RINs have since traded for over 25 cents each, a multiple of 100 times.

FUTURE VIEW: With the impending RFS2 regulations, there will be several types of RINs in the marketplace – each trading at a different price point and in some cases driven by technology specific issues. These future RIN values will be based upon similar factors as described above and as they apply to a specific type of RIN. For example cellulosic RINs (Type C RINs) will have a different value than RINs derived from say corn ethanol (Type R RINs – also known as renewable fuel RINs), due to their availability in the market place.

In fact, due to a special consideration in the 2007 Energy Independence and Security Act (EISA), RINs derived from cellulosic biofuels (Type C RINs), bring a new twist to RIN values. Type C RINs will have a floor price of not less than 25 cents per RIN, and possibly more depending upon the rack price of gasoline in any given year. This is a subject we will explore more in future briefings.

Click here to download a PDF of Educational Series Briefing No 9: Market Factors Influencing RIN Values.

Past briefings are available by clicking here.

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Coming Up Short

Coming Up Short

By: Kris Bevill
From the November 2009 Ethanol Producer Magazine

ethanol-producer

As the U.S. EPA ponders comments submitted in response to its proposed rule for the second stage of the renewable fuel standard, cellulosic biofuel producers wonder how they will produce enough fuel to meet a 2010 mandate, and what will happen to the industry if they don’t.

The U.S. EPA’s proposed rule for the second stage of the renewable fuel standard (RFS2) is filled with complicated issues that address everything from indirect land use impacts to definitions of feedstocks and greenhouse gas emission reduction rates. A final rule is not expected from the EPA until at least Dec. 1 and could possibly be delayed until next year due to the complexity of the issues being addressed. Nevertheless, in its proposal, the agency calls for 2010 mandate requiring 100 million gallons of cellulosic biofuel to be produced and, so far, there is no indication the agency plans to lessen the volume requirement.

Read the rest of this entry »

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Educational Series: What is The Renewable Fuel Standard?

RFS Educational Series Briefing No. 1: What is The Renewable Fuel Standard?

Written by Clayton McMartin for Televent DTN

The Renewable Fuel Standard or RFS is a federal program which promotes the use of renewable fuels in the nation’s motor fuel pool. The initial RFS, now known as RFS1 was established as a result of the 2005 Energy Policy Act (EPACT) and went into effect on Sept. 1, 2007. Fundamental to the RFS is the mandated use of renewable fuels, such as ethanol and biodiesel, throughout the continental United States and Hawaii (1).

The first year of the new fuel standard required that a minimum of 4.7 billion gallons of renewable fuel, prorated to the months September through December, be blended into the nation’s on-road gasoline and diesel fuels. The actual standard is expressed as a percentage, based upon the American motorist’s fuel use in any given year. In 2007 the RFS value was 4.02 percent of the nation’s total on-road gasoline consumption, excluding Alaska. Working together with the Department of Energy, EPA is required to calculate and publish the coming year’s standard by Nov. 30th of each preceding year.

An advanced fuel standard, known now as RFS2, was enacted into law with the passage of the 2007 Energy Independence and Security Act (EISA), and signed by President George W. Bush on Dec. 19, 2007. The new RFS2 dramatically increases the mandated use of renewable fuels. This is accomplished through an increasing schedule of approximately 30 percent annually at which point it peaks at 36 billion gallons per year in 2022.

Originally scheduled to take effect on Jan. 1, 2009, RFS2 has been plagued with delays. Through the formal rulemaking process, EPA proposed a new effective date of Jan. 1, 2010, which will almost certainly be delayed even further.

In our next article we will investigate the renewable identification number also known as the RIN.

(1)Non-contiguous states and territories had the choice to opt into the renewable fuel standard as it was originally promulgated. Hawaii petitioned EPA on June 22, 2007 to opt into the RFS program, and EPA approved their request on July 22, 2007.

Click here to download a PDF of Educational Series Briefing No 1: What is The Renewable Fuel Standard?.

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RIN Credits, Ethanol Blending and the 800-pound Gorilla

RIN Credits, Ethanol Blending and the 800-pound Gorilla

By: Ron Kotrba
From the April 2009 Ethanol Producer Magazine


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Renewable energy credit prices are on the rise as ethanol blend economics remain poor and the year-end reporting date looms. EPM talks with Clayton McMartin, president of Clean Fuels Clearinghouse, about renewable identification number credits, industry consolidation, and the oil industry’s 800-pound gorilla, Valero Energy Corp., which can no longer be ignored.

The 800-pound gorilla in the room finally announced itself in early February. For months, speculators have been trying to figure out which ethanol companies will buy out which ethanol plants during this period of crushing economic recession and potential ethanol industry consolidation. Aside from food companies, what other industry made record profits in 2008 and could logically purchase distressed ethanol production facilities? The oil refiners—they who are obligated to blend ethanol into their supplies as mandated under the federal renewable fuels standard (RFS). On Friday, Feb. 6, VeraSun Energy Corp. “took out the trash”—that’s public relations lingo for releasing bad news on a Friday, with the understanding that there will be little coverage of it until at least Monday. The same day, VeraSun issued a press release titled, “VeraSun Energy Obtains ‘Stalking Horse’ Bid From Valero for Five Facilities; Files Motion Seeking Authority to Sell Substantially All Assets by March.” Read the rest of this entry »

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EPA rolls out RINs Moderated Tracking System

EPA Rolls Out RINs Moderated Tracking System

By: Ron Kotrba
From the March 2009 Web Exclusive Ethanol Producer Magazine

ethanol-producer

The U.S. EPA held a Webinar on Feb. 25 to explain its development of a Moderated Tracking System that will accurately and securely track renewable identification number (RIN) credits.

A RIN is a 38-character numeric code that’s generated by the producer or importer of renewable fuel; it represents gallons of renewable fuel produced/imported and is assigned to batches of renewable fuel that are transferred (change of ownership) to others. RINs are valid for the calendar-generated, or the following year.

RINs currently apply to the ethanol industry; however beginning in 2010 RINS will also apply to the biodiesel industry.

The EPA is developing MTS to track the generation, distribution and sale of RINs as a way to help accurately enforce the mandates under the renewable fuels standard enacted in the Energy Independence & Security Act of 2007. The market-based renewable fuels registry RINSTAR has been working with the EPA to help develop a federal register through which all RIN transactions would flow to ensure accurate and honest reporting. Read the rest of this entry »

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