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

Another possible approach to RIN life would be to interpret the Energy Act's 12month
credit life provision as applying retrospectively, not prospectively. Under this
approach, the 12-month timeframe in the Act would be interpreted to refer to the calendar
year within which a credit was generated. If excess RINs were deemed to be such on
December 31, then under this alternative approach no RINs could be used for compliance
purposes beyond the year in which they originally came into existence.
However, the Act explicitly indicates that obligated parties may either use the credits
they have generated or transfer them. For a party to be able to use credits generated, such
credit use must necessarily occur in a compliance year other than the one in which the credit
was generated. Thus we believe that it is appropriate for all RINs to be valid for the year in
which they were generated and the following calendar year. In comparison to a single-year
valid life for RINs, our proposed approach provides some additional compliance flexibility to
obligated parties as they make efforts to acquire sufficient RINs to meet their RVOs each
year. This flexibility will have the effect of keeping fuel costs to a minimum.
We recognize that the language of the Act regarding credit valid life is not
unequivocal. However, we believe that an interpretation leading to a valid life of one year
after the year in which the RIN was generated is most consistent with the program as a
whole. The record of the development of this legislation does not provide a clear indication
to the contrary. In fact, while some stakeholders have argued that the Energy Act could have
been written to explicitly allow a valid life of multiple years if that had been Congress' intent,
we believe it could likewise have been written to explicitly limit the valid life to the year in
which the renewable fuel was produced if that had been its clear intent. Therefore, the
interpretation of the valid life language in the Act must be established in the context of the
statutory requirements for the full RFS program and the practical implications of its
implementation.
One possible objection to our proposed approach is that the use of RINs generated in
one compliance period to satisfy obligations in a subsequent compliance period could result
in less renewable fuel used in a given year than is set forth in the statute. However, the
language in the Act shows that Congress clearly intended a credit program that provided a
degree of implementation flexibility. For instance, the deficit carryover provision allows any
obligated party to fail to meet its RVO in one year if it meets the deficit and its RVO in the
next year. If many obligated parties took advantage of this provision, it could result in the
nationwide total volume obligation for a particular calendar year not being met. In a similar
fashion, the statutory requirement that every gallon of cellulosic biomass ethanol be treated
as 2.5 gallons for the purposes of compliance means that the annually required volumes of
renewable fuel could be met in part by virtual, rather than actual, volumes. Finally, the
calculation of the renewable fuel standard is based on projected nationwide gasoline volumes
provided by EIA (see Section III.A). If the projected gasoline volume falls short of the actual
gasoline volume in a given year, the standard will fail to create the demand for the full
renewable fuel volume required by the Act for that year. The Act contains no provision for
correcting for underestimated gasoline volumes.
- 74 -