Posts Tagged ‘RFS2’

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!

Need More Details?
Complete Details Are Available Here!

Let EPA know what you think!

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Introducing RFS2 Video Updates

Have a look at this short video to learn more about what we are doing at RINSTAR® to prepare for the New Advance Renewable Fuel Stanard (RFS2). You might want to also want to get a copy of “America Advances to Performance Based Fuels” White Paper in order to establish a good overall understanding of the program.

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New RIN Certificate™

The New RFS2 program requires a number of modifications to existing business practices.  One of the most significant changes is in the area of product transfer documentation.   Literally thousands of companies throughout the renewable fuel supply chain receive RIN CertificatesTM from their suppliers operating on RINSTAR®.  Recognizing how important it is that your business operations not be hindered by regulatory changes, we are introducing the new RIN CertificatesTM to the market place well in advance of the July 1 effective date for RFS2.  The video above provides you with the information you and your counterparties need to understand as we all prepare for RFS2.

BTW – the video can be viewed full screen by selecting the appropriate button on the player menu bar.

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RFS2 Workshop in Iowa

The Iowa Renewable Fuels Association is co-hosting a workshop on RFS2 along with the National Biodiesel Board, the Renewable Fuels Association, Growth Energy, and the American Coalition for Ethanol on April 6th in Des Moines Iowa. I have been invited to present on the subject of RINs and the transition to the new EMTS database. Two EPA representatives will be present, along with industry experts to answer questions about RFS2 and the transition that is currently underway.

View a copy of the agenda here:

The deadline for registration is Friday, April 2. The form is available here:

If you are in Iowa at the conference, be sure an look me up.

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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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Editorial: EPA Appears Caught in a Catch 22

Two key timing issues have essentially paralyzed the Environmental Protection Agency at this point regarding the Renewable Fuels Standard. The first is the pending issuance of the much awaited final rules for RFS2 and the second is the Nov. 30th deadline for the 2010 mandates. It appears that EPA cannot issue one without the other.

Why is this? Because it is essentially a “Catch 22” leaving EPA in the unenviable position of establishing a mandate with what some will challenge they have no authority to do.

In fact, during the comment period for RFS2 notice of proposed rulemaking, the American Petroleum Institute in comments from Al Manato delivered to the docket on Sept. 25 made the following comments on this subject:

a. EPA cannot enforce EISA RFS volume mandates without final regulation.

“It is API’s position that EPA cannot lawfully establish renewable fuel standards (either general or fuel-type specific) based on the volumes set forth in the Energy Independence and Security Act of 2007 (EISA) without completing the rulemaking specified in the final sentence of CAA 211(o)(2)(A)(i). In addition, EPA cannot lawfully extend the RFS program to fuels other than gasoline. API is concerned that the Agency has imposed the EISA-mandated total renewable volume in 2009. EPA should not attempt to enforce a 17 percent greater mandate in 2010 until the RFS2 rulemaking is finalized. The rules that were finalized according to the Administrative Procedures Act procedures which implemented the Energy Policy Act of 2005 (EPACT05) require no more than 6.8 billion gallons of renewables in 2010.”

Nov. 30th came and went without EPA issuing the much awaited 2010 mandates for renewable fuels. The 2005 Energy Policy Act requires EPA to work with the Department of Energy and establish the coming year’s renewable fuel standard, which then allows obligated parties to establish their volumetric targets for the coming year. According to statutes, this report is due no later than Nov. 30th of the year prior to the compliance year in which the mandates are being established.

Of course, the mandates also serve as a floor to renewable fuel demand and allow producers, distributors, marketers, blenders, and importers to establish their strategic plans for the coming year. Even in the best of cases, there is little time to make final operational and commercial modifications. And now with less than a month remaining in 2009, companies are left wondering what the final targets will be.

Obviously, not everyone sees this important issue the same way. However, the bottom line is the fact that this constant uncertainty combined with delays will take its further toll on all who operate in the renewable fuels business arena.

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Educational Series: How Are RINs Used?

RFS Educational Series Briefing No. 4: How Are RINs Used?

Written by Clayton McMartin for Televent DTN

In previous briefings we covered the fact that RINs are utilized to track renewable fuel through the supply chain, but ultimately RINs are used to demonstrate compliance. Companies identified by EPA as “obligated parties” must meet the mandated standards in order to remain compliant with the federal law.

The typical obligated party is a company that refines crude oil and produces finished gasoline. By far the biggest portion of obligated parties are refiners, such as ExxonMobil, ConocoPhillips, Valero, BP, Shell, and Chevron. Other companies that fall under the RFS obligated party classification would be importers of gasoline into the U.S. as well as companies that buy petroleum intermediate components and blend at facilities like fuel terminals to produce finished gasoline.

Under the regulations, each of these obligated parties is then bound by the law to use their pro-rata share of renewable fuel. Recalling that the RFS is really a percentage established each year (see Briefing #1 What is the Renewable Fuel Standard?), the company multiplies their on-road gasoline production (1) times the RFS to determine their obligation. This is called their RVO or renewable volume obligation.

Obligated parties demonstrate to EPA that they have met or exceeded their RVO by the submission of RINs each year. These RINs can be acquired through the process of purchasing and blending renewable fuel into their own pool of petroleum products or by acquiring RINs from another party that has blended renewable fuel in excess of their RVO and is willing to sell their RINs to the obligated party. As you can see, central to the RFS program are provisions for credit banking and trading, with the RIN serving as the paper credit for this purpose.

(1) FUTURE VIEW: Under the RFS2 the program basis is extended from only on-road gasoline to now include non-road, locomotive, and marine fuels. Additionally, the RVO will be broadened to encompass four separate standards. With RFS2 come four categories of mandated fuels, resulting in four different standards each year. More details about these four different standards and how the program will work will be provided in future RFS Educational Briefings.

Click here to download a PDF of Educational Series Briefing No 4: How Are RINs Used?

Past briefings are available by clicking here.

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