Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...
Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...
Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...
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Prior to 2013, the Act specifies that cellulosic biomass ethanol or waste derived<br />
ethanol will be considered equivalent to 2.5 gallons <strong>of</strong> renewable fuel when determining<br />
compliance with the renewable volume obligation. As discussed in Section III.D below,<br />
a batch’s RIN would indicate whether it was cellulosic or non-cellulosic ethanol.<br />
Beginning in 2013, the 2.5 to 1 ratio no longer applies for cellulosic biomass ethanol. In<br />
its place, the Act requires that the applicable volume <strong>of</strong> required renewable fuel specified<br />
in Table I.B-1 include a minimum <strong>of</strong> 250 million gallons that are derived from cellulosic<br />
biomass. As shown in Table III.A.2-1 above, we have estimated this value (250 million<br />
gallons) as a percent <strong>of</strong> an obligated party’s production for 2013. Thus, an obligated<br />
party would be subject to two st<strong>and</strong>ards in 2013 <strong>and</strong> beyond, a non-cellulosic st<strong>and</strong>ard<br />
<strong>and</strong> a cellulosic st<strong>and</strong>ard.<br />
3. Compliance In 2007<br />
The Energy Act requires that EPA promulgate regulations to implement the RFS<br />
program, <strong>and</strong> if EPA did not issue such regulations then a default st<strong>and</strong>ard for renewable<br />
fuel use would apply in 2006. As described in Section I.C, we promulgated a direct final<br />
rule to interpret <strong>and</strong> implement the application <strong>of</strong> the statutory default st<strong>and</strong>ard <strong>of</strong> 2.78<br />
percent in calendar year 2006. However, the Act provides no default st<strong>and</strong>ard for any<br />
other year. Instead, the regulations we promulgate are required to address renewable fuel<br />
usage, including calendar year 2007. The program we are proposing today will therefore<br />
apply in 2007. While we plan to promulgate the final rule as soon after today's proposal<br />
as possible, it will likely not be effective by January 1, 2007. Therefore, our proposal<br />
must address how, <strong>and</strong> for what time periods, the applicable st<strong>and</strong>ard <strong>and</strong> other program<br />
requirements will apply to regulated parties for gasoline produced during 2007.<br />
We have identified several options for 2007 compliance. One option would be to<br />
extend the collective compliance approach used for 2006 to 2007. Although the Act<br />
contains no default st<strong>and</strong>ard applicable to 2007, under this approach we would apply the<br />
renewable fuel st<strong>and</strong>ard that we calculate for 2007 to obligated parties on a collective<br />
basis rather than on an individual basis. Under this approach, no individual facility or<br />
company would be liable for meeting the applicable st<strong>and</strong>ard. At the end <strong>of</strong> 2007 we<br />
would determine if the industry as a whole had met the st<strong>and</strong>ard on average, <strong>and</strong> any<br />
deficit would be carried over into 2008. This approach would be essentially equivalent to<br />
deferring the start <strong>of</strong> the program to 2008, but with the addition <strong>of</strong> an industry-wide<br />
deficit carryover provision. Current projections from the Energy Information<br />
Administration (EIA) on the volume <strong>of</strong> renewable fuel expected to be produced in 2007<br />
indicate that an industry-wide deficit carryover would most likely be unnecessary under<br />
this collective compliance approach.<br />
However, given the requirements <strong>of</strong> the Act, we do not believe that a collective<br />
compliance approach is appropriate for 2007. The Energy Act requires us to promulgate<br />
regulations that provide for the generation <strong>of</strong> credits by any person who overcomplies<br />
with their obligation. It also stipulates that a person who generates credits must be<br />
permitted to use them for compliance purposes, or to transfer them to another party.<br />
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