EPA Finalizes Changes to Renewable Fuel Standard Program

Milbank's Renewable Fuel Standard Client Update sheds light on the outlook for biofuels.

Special thanks to Milbank, Tweed, Hadley & McCloy LLP

Introduction

The Environmental Protection Agency (“EPA”) has finalized regulations that update the Renewable Fuel Standard (“RFS”) Program, pursuant to the Energy Independence and Security Act of 2007 (“EISA,” Pub. L. No. 110-140).1 The initial RFS Program (“RFS1”), established by the Energy Policy Act of 2005 (Pub. L. No. 109-58), required a minimum volume of renewable fuel to be blended into gasoline each year.2 The new program (“RFS2”) now applies to all transportation fuel, increases the volume standard and creates new fuel categories and eligibility requirements, including mandatory greenhouse gas (“GHG”) reduction thresholds for select fuels.3


RFS2 expands on the purposes originally set forth by RFS1. By mandating minimum volumes of renewable fuel in the U.S. fuel supply, it is expected that greenhouse gas emissions will decrease, greater independence from imported petroleum will be achieved, and the nation’s renewable fuels sector will grow considerably.4 EPA has projected that by 2022, when the required volume of renewable fuels increases to 36 billion gallons (“bg”), there will be new and expanded markets for agricultural products, like corn and soybeans, and cellulosic feedstock, as well as markets for advanced biofuels and conversion technologies.5

To further encourage growth in the biofuel sector, the U.S. Department of Agriculture is considering increasing funding for companies that want to convert biomass to bio-energy and bio-based products.6 The EPA is also reviewing a Clean Air Act waiver request that, if approved, would permit the ethanol content of gasoline to be increased from10 percent to 15 percent.7 This would allow the market to better absorb the increase in biofuels. Though EPA does not expect to issue a decision until mid-2010, the Agency has indicated the “need” to approve such an increase.8

This all coincides with the expansion and promotion of renewables. As mentioned earlier, the
RFS2 program now applies to all transportation fuel. This includes gasoline and diesel for use in motor vehicles, motor vehicle engines, nonroad vehicles and nonroad engines.9 It also includes marine diesel, heating and jet fuel.10 This means that refiners, except for small refiners that fall into the statutory exclusion, and importers who produce or import such gasoline or diesel fuel within the 48 contiguous states or Hawaii have to comply with the standards set out in RFS2.11 In areas where a U.S. territory opts in, the standards also apply.12 The new regulations set out in this recent final ruling will apply starting on or after July 1, 2010. However, with regards to the volume standards each obligated party must meet, the compliance period runs from January 1, 2010 to December 31, 2010.13


Click here for the full article from the Milbank website.

The following chart details the RFS schedule BEFORE the EPA updates to the program.