Biofuel Producers to Bear New Burden of Proof with RFS2

By Clayton McMartin | June 09, 2009
The recently proposed rules for what is now known as RFS2 have established a new and formidable challenge for virtually every biodiesel producer delivering product to the American consumer. Beginning January 1, 2010, producers of any significant quantity of biofuels must certify and provide an account of the related feedstock all the way back to the point of origin.

Consider this example: Acme Biofuels Inc.-the company produces mono-alkyl ester by processing soy beans at its facility in Missouri. On January 4, 2010, Acme produces a 7,000 gallon batch and is now ready to assign renewable identification number credits (RINs) to that batch. Under RFS2, Acme must now have an account for every soybean processed, traceable all the way back to the land(s) from which it was harvested. Without these records, the producer can not generate RINs under the proposed RFS2.

Waste grease processors will not be immune to this requirement either. In the case of Go-Green Biodiesel, a small plant producing 100,000 gallons of product each year, the burden of proof still remains. Let's say, Go-Green purchases a load of waste grease from Big John's Collection Services. Big John will need to deliver historical documentation for each gallon, certifying a pathway all the way back to each fast food restaurant or greasy spoon from which the feedstock was collected. Without this documentation, Go-Green will not be able to generate RINs under RFS2.

As the market for renewable fuel and the associated credits has developed, so has the price for the RINs. With Type B, or biomass-based diesel, RIN prices reaching more than 25 cents per credit at times, producers simply can not afford to leave this money on the table. Furthermore, the new proposed EPA rules will not permit it. If for some reason a producer decides to not assign RINs to a batch of fuel, EPA still requires that the feedstock be tracked back to the point of origin. In the case of Acme Biofuels, if it does not assign RINs to its fuel, the company needs to prove the soybeans came from land that was not in cultivation prior to December 19, 2007. In other words, if there is a RIN assigned to a gallon of biofuel, the producer has the burden of proof to establish to EPA that the feedstock comes from eligible lands; if there is not a RIN assigned to it, the producer must prove the feedstock came from ineligible lands. To operate otherwise would be a violation of the Clean Air Act, which carries the potential of fines at $32,500 per day plus any economic benefit derived from the violation.

As you may have deducted by now, the new burden of proof requirements stem from fuel pathway requirements and indirect land use provisions in the Energy Independence and Security Act of 2007, an issue that the industry trade associations are certainly sensitive to. If implemented as proposed, these new regulations will establish a formidable barrier to participation, a regulatory hurdle that many may not be able to clear.

In my experience operating the RINSTAR renewable fuel registry, such a fundamental change to the RFS program will be a significant challenge. With more than 170 members, several of which are biodiesel producers, considerable program changes are in the development stage now at RINSTAR in anticipation of the final RFS2 implementation as early as January 1, 2010.

Operating companies throughout the renewable fuel supply chain must take action now if they expect to adhere to the impending federal laws. The advent of the RFS2 under EISA marked a new era of government involvement in the business of biofuels. Since the passing of RFS1 in 2005, we now have a California Low Carbon Fuel Standard set to go in place in 2010, along with a federal RFS2 slated for implementation in the same year. At least 11 other states have pledged to implement their own LCFS, with all of these programs almost certainly having a fuel pathway component. Obviously, regulators will have an increasingly higher level of interaction with every biodiesel producer and their businesses-bringing to mind the old saying, "We are with the government and we are here to help."

Regardless whether the indirect land use components of these regulations are ultimately modified, producers planning to stay in business must prepare now. The burden of proof will be on the shoulders of every producer in the supply chain, requiring feedstock certification all the way back to the land, the slaughter house or the restaurant.

A RFS2 Stakeholder Awareness Webinar series discussing the burden of proof requirements along with a number of additional issues was conducted with representatives of EPA and industry experts recently. Biodiesel Magazine readers can gain access to this series of informative recordings at www.CFCH.com and using the promotion code "BDM." The first Webinar in the series will be available at no charge to the first 50 people who sign up.

Clayton McMartin is the president of Clean Fuels Clearinghouse, the company behind the only U.S. renewable fuel registry, RINSTAR. Contact him through the Web site www.CFCH.com.
 
 
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