The ink on the renewable fuels standard (RFS) may barely be dry, but our industry still has a lot of work to do in preparing ethanol plants for compliance. At a May RFS Implementation Workshop, largely attended by petroleum interests, the U.S. EPA laid out the contours of the documentation necessary for ethanol plants to comply by Sept. 1, 2007—or risk paying a $32,500 fine.

Now that I have your attention, let's take a look back. The EPA established the RFS to encourage the blending of biofuels in our nation's motor vehicle fuel. Basically, the government is mandating that every gallon of ethanol—from the producer to the customer—be tracked and reconciled to a valid number. Since the government is requiring that so much renewable fuel be used each year, this is the method they will use to track how much the oil companies are consuming.

A program in the RFS allows obligated parties to comply even if they cannot or do not wish to blend biofuels into gasoline. That's where Renewable Identification Numbers (RINs) come in.

Our conversations with the major ethanol marketers indicate they are on top of the issue and will have measures in place to assist the plant operators, but the plants ultimately bear the responsibility of ensuring they are in compliance. Make sure you check with your marketer to discuss compliance and tracking so that you are prepared. Time is running out.

"Generating the RIN, tracking and reporting RINs to the EPA, and validating RINs for audit purposes is the responsibility of the ethanol plants," says Karen Andersen-Schank, strategic projects coordinator with Provista, a leading ethanol marketer. "Our responsibilities are similar in that each party tracks, reports and validates RINs. Each party is key to making the program successful."

The Attest Engagement
Under the final rule, ethanol plants will require a certified public accountant or certified internal auditor to verify the underlying documentation that forms the basis of the reports plants submitted to the EPA. The 2007 report may be submitted with the 2008 attest engagement report. In addition, cellulosic biomass or waste-derived ethanol producers will need an independent third party (like a state-licensed chemical engineer) to review records to support claims that the ethanol was actually "cellulosic."

Paul Argyropoulos, senior policy adviser in the EPA's Office of Transportation and Air Quality, says the agency is ready to help plants comply. "Sufficient guidance and support has been provided for the producers to register on-time, to understand what their specific compliance requirements are, and to be able to meet the September deadline," he says. "We continue to make ourselves available to respond to any questions they might have and to assist them in meeting that schedule."

RFA facts from the EPA's Office of Transportation and Air Quality
› The EPA issued final regulations April 10, 2007, establishing the nation's first comprehensive RFS program.
› The program sets forth a path to increase the supply of alternative and renewable fuels in the United States. The RFS is designed to strengthen our energy security and support America's farmers.
› Authorized by the Energy Policy Act of 2005, the RFS program requires that the equivalent of at least 7.5 billion gallons of renewable fuel be blended into motor vehicle fuel sold in the United States by 2012.
› The RFS program will promote the use of fuels such as ethanol and biodiesel, which are largely produced from American crops. The program will create new markets for farm products, increase energy security and promote the development of advanced technologies that will help make renewable fuel cost-competitive with conventional fuels.
› In particular, the RFS program establishes special incentives for producing and using fuels produced from cellulosic biomass, such as switchgrass and woodchips.

Jesse McCurry is a business development consultant with Kennedy and Coe LLC, a Kansas-based certified accountant and consulting firm. The firm is a member of the Renewable Fuels Association, the Ethanol Promotion and Information Council, and the American Coalition for Ethanol. Reach McCurry at jmccurry@kcoe.com or (316) 685-0222.