RFS anyone? The Renewable Fuel Standard, what is it and how does it affect me? Does your site produce Renewable Natural Gas (RNG), or eRIN eligible electricity? If so, the proposed RFS affects you! Key issues at this point are:
- Proposed volumes are too low, in particular for cellulosic biofuel.
- Dramatic increase in small refinery exemptions that has caused a precipitous drop in demand (as well as a disruptive increase in supply, due to the retroactive nature of the exemptions).
- Inclusion of eRINs.
This is the annual update that sets the standards for all renewable fuel produced or imported in the year 2020. In particular, EPA has the authority to apply waivers whenever the projected cellulosic biofuel production volume is less than the applicable volume specified in the statute. Basically, the RFS allows EPA to determine if the renewable fuel industry can produce the quantity of cellulosic biofuel mandated in the Standard. If the EPA determines that there is a shortfall, then under the law they are able to manufacture waivers in an effort to balance the demand and the supply. If the EPA underestimates the projected production though, then an overabundance of waivers will depress demand and stunt potential growth on the supply side.
The same basic argument applies to the small refinery exemption, with one important twist. The small refinery exemption was intended to ensure that the requirements of the Renewable Fuel Standard were not economically devastating to small-scale refineries. In the past few years though, the definitions of ‘small refinery’ and ‘economic hardship’ have grown to the point where relatively large refineries are being granted exemptions for what might be considered economic inconveniences. The effect of this expansion is two-fold: first, for the refinery receiving the exemption, their production volume is removed from the demand side of the market; second, any RINs that they own for prior obligations are now available to offset the obligations of other, larger refineries, thereby diluting the supply side of the market. The new expansion of these definitions has depressed the market value of legitimately produced RINs to less than the ‘floor’ price of the EPA-produced waiver credits.
Full text of the proposed Renewable Fuel Standard can be accessed here.
We will continue to follow this issue as it develops. Please reach out if you have data that could support the association’s arguments; in particular, data on potential investment, infrastructure development, job growth, or projected demand for RNG.
Please contact the Hoosier Chapter to provide comments or questions.