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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Another possible approach to RIN life would be to interpret the Energy Act's 12month<br />
credit life provision as applying retrospectively, not prospectively. Under this<br />
approach, the 12-month timeframe in the Act would be interpreted to refer to the calendar<br />
year within which a credit was generated. If excess RINs were deemed to be such on<br />
December 31, then under this alternative approach no RINs could be used for compliance<br />
purposes beyond the year in which they originally came into existence.<br />
However, the Act explicitly indicates that obligated parties may either use the credits<br />
they have generated or transfer them. For a party to be able to use credits generated, such<br />
credit use must necessarily occur in a compliance year other than the one in which the credit<br />
was generated. Thus we believe that it is appropriate for all RINs to be valid for the year in<br />
which they were generated <strong>and</strong> the following calendar year. In comparison to a single-year<br />
valid life for RINs, our proposed approach provides some additional compliance flexibility to<br />
obligated parties as they make efforts to acquire sufficient RINs to meet their RVOs each<br />
year. This flexibility will have the effect <strong>of</strong> keeping fuel costs to a minimum.<br />
We recognize that the language <strong>of</strong> the Act regarding credit valid life is not<br />
unequivocal. However, we believe that an interpretation leading to a valid life <strong>of</strong> one year<br />
after the year in which the RIN was generated is most consistent with the program as a<br />
whole. The record <strong>of</strong> the development <strong>of</strong> this legislation does not provide a clear indication<br />
to the contrary. In fact, while some stakeholders have argued that the Energy Act could have<br />
been written to explicitly allow a valid life <strong>of</strong> multiple years if that had been Congress' intent,<br />
we believe it could likewise have been written to explicitly limit the valid life to the year in<br />
which the renewable fuel was produced if that had been its clear intent. Therefore, the<br />
interpretation <strong>of</strong> the valid life language in the Act must be established in the context <strong>of</strong> the<br />
statutory requirements for the full RFS program <strong>and</strong> the practical implications <strong>of</strong> its<br />
implementation.<br />
One possible objection to our proposed approach is that the use <strong>of</strong> RINs generated in<br />
one compliance period to satisfy obligations in a subsequent compliance period could result<br />
in less renewable fuel used in a given year than is set forth in the statute. However, the<br />
language in the Act shows that Congress clearly intended a credit program that provided a<br />
degree <strong>of</strong> implementation flexibility. For instance, the deficit carryover provision allows any<br />
obligated party to fail to meet its RVO in one year if it meets the deficit <strong>and</strong> its RVO in the<br />
next year. If many obligated parties took advantage <strong>of</strong> this provision, it could result in the<br />
nationwide total volume obligation for a particular calendar year not being met. In a similar<br />
fashion, the statutory requirement that every gallon <strong>of</strong> cellulosic biomass ethanol be treated<br />
as 2.5 gallons for the purposes <strong>of</strong> compliance means that the annually required volumes <strong>of</strong><br />
renewable fuel could be met in part by virtual, rather than actual, volumes. Finally, the<br />
calculation <strong>of</strong> the renewable fuel st<strong>and</strong>ard is based on projected nationwide gasoline volumes<br />
provided by EIA (see Section III.A). If the projected gasoline volume falls short <strong>of</strong> the actual<br />
gasoline volume in a given year, the st<strong>and</strong>ard will fail to create the dem<strong>and</strong> for the full<br />
renewable fuel volume required by the Act for that year. The Act contains no provision for<br />
correcting for underestimated gasoline volumes.<br />
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