Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

The blender approach would differ from our proposed program and all the other
alternative approaches in that it would be based on actual blending activity, as compared
to ownership of the renewable fuel. Under this alternative approach, the blender would
not use records of batch ownership to establish generation of credits, but rather would be
required to demonstrate that it had actually blended the renewable fuel into gasoline or
diesel. Since the blender was responsible for blending, the blender would generate the
credits from that blending and would have the right to transfer them to another party.
Although blenders could use IRS fuel credit forms to verify the volumes of
ethanol blended into gasoline under this alternative, the IRS forms would not provide
useful information related to biodiesel or other renewable fuels that are blended into
conventional gasoline or diesel 36 . Alternative approaches to verifying that these other
renewable fuels were actually blended would therefore need to be designed under this
alternative, and these verifications would necessarily involve additional recordkeeping
and reporting requirements.
This approach would also tend to increase the burdens on refiners to gain access
to credits and thus demonstrate compliance. A refiner who took ownership of a batch of
renewable fuel could not use that batch to meet its RVO unless he blended it into gasoline
or diesel himself. Such circumstances would create additional complexity for the
obligated parties that are avoided by the more streamlined approach we are proposing.
A blender approach would also be difficult to implement. To begin with, many
blenders are small businesses, and none have been substantially regulated in an EPA fuel
program before. We would be imposing upon these parties the primary enforcement
burden associated with the RFS program even though they are not obligated for meeting
the renewable fuel standard. Also, this approach would not be able to distinguish
between cellulosic biomass ethanol and ethanol made from other feedstocks, which
creates significant difficulties in meeting program requirements.
Under a blender approach, even accurate records of blending would be difficult to
verify. There are more than 1200 blenders in the U.S. who blend ethanol into gasoline, in
addition to those that blend biodiesel into conventional diesel fuel. Thus the blender
approach would maximize the number of parties involved, overly complicating the
compliance system. The enforcement burden on the Agency would be significant, and
ultimately it would be likely that many claims of blending would go unchecked.
Some of the concerns raised above could be addressed by re-introducing the RIN
concept into a blender approach. For instance, the existence of RINs could help identify
cellulosic biomass ethanol as such. However, if a RIN-based system were implemented,
this alternative approach would become very similar to our proposed program, but with
36 There is some evidence that biodiesel producers are operating as blenders in order to claim the right to
the federal excise tax credit for biodiesel. However, in these cases they often blend only very small
amounts of conventional diesel into biodiesel, such as 0.1 volume percent. The mixture, identified as
B99.9, is then transported to another blender who often adds significant additional quantities of
conventional diesel to make blends such as B2 or B20.
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