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

These credit provisions have meaning only in the context of an individual obligation to
meet the applicable standard. Delaying a credit program until 2008 would mean the
credit provisions have no meaning at all for 2007.
A variation of the collective compliance approach would add a credit carryover
provision in which any excess renewable fuel produced on an industry-wide basis in 2007
would be subtracted from the required volume in the calculation of the applicable 2008
standard. However, under a collective compliance approach, such a credit carryover
provision would not meet the statutory requirement since no individual companies could
generate, bank, or trade credits. Therefore we do not believe that a collective compliance
approach is appropriate.
Another option for 2007 compliance would be for obligated parties to calculate
their renewable fuel obligation based on all gasoline volumes produced at any time
during the calendar year, regardless of when in 2007 the final rule is published or
becomes effective (i.e., the calculation of the renewable volume obligation looks back
retroactively to the beginning of the year for gasoline production). Compliance would be
determined based on a whole calendar year's production of gasoline, and the compliance
determination would not be required until calendar year 2007 was over, after the final
rule was published. Obligated parties would know the proposed standard based on
today's action, and all regulated parties would likewise know the proposed provisions for
recordkeeping, RIN generation and assignment, etc. On this basis they could begin the
process of generating RINs and tracking batches of renewable fuel prior to the
publication of the final rule. However, it might not be appropriate to apply the standard
to all gasoline produced in 2007 unless the regulatory provisions in today's proposal are
very similar to those in the final rule. Otherwise, obligated parties and renewable fuel
producers would not have adequate lead-time.
For this approach to be effective, renewable producers would have to begin
placing RINs on their PTDs at the start of the year 2007 even though the regulations are
not yet final. If they do not, then there could be a shortage of RINs available for
obligated parties to use for compliance by the end of the year. Since there is no guarantee
that renewable fuel producers would generate RINs appropriate prior to adoption of the
regulations, another option would be for the Agency to finalize just those RIN-related
provisions prior to the end of 2006 that are critical to measuring and tracking batches of
renewable fuel and the assignment of RINs to those batches. However, in practice this
approach would be little different than finalizing the full rulemaking. As a result we do
not believe that this would be a viable option given the time available.
Finally, given the challenges and shortcomings inherent in the other options, we
could simply apply the renewable fuel standard to only those volumes of gasoline
produced after the effective date of the final rule. Essentially the renewable volume
obligation for 2007 would be based on only those volumes of gasoline produced or
imported by an obligated party prospectively from the effective date of the rulemaking
forward, and renewable producers would not have to begin generating RINs and
maintaining the necessary records until this same date. As a result, such an approach
- 37 -