US EPA proposes denying point of obligation change under RFS

The U.S. EPA announced Nov. 10 it is proposing to deny several petitions requesting that the agency reconsider or change the point of obligation under the renewable fuel standard (RFS), which identifies refiners and importers of gasoline and diesel fuel as those responsible for compliance. EPA is providing an opportunity for the public to comment on the petitions it received and on its proposed denial of the requests to initiate rulemaking.

Since 2014, obligated parties and other stakeholders have asserted the point of obligation should be downstream.

“The petitioners all seek to have the point of obligation shifted from refiners and importers, but differ somewhat in their suggestions for alternatives,” EPA stated. “Some request that EPA shift the point of obligation from refiners and importers to those parties that blend renewable fuel into transportation fuel. Others suggest that it be shifted to those parties that hold title to the gasoline or diesel fuel immediately prior to the sale of these fuels at the terminal …  or to ‘blenders and distributors.’ All petitioners argue, among other things, that shifting the point of obligation to parties downstream of refiners and importers in the fuel distribution system would align compliance responsibilities with the parties best positioned to make decisions on how much renewable fuel is blended into the transportation fuel supply in the United States. Some of the petitioners further claim that changing the point of obligation would result in an increase in the production, distribution, and use of renewable fuels in the United States and would reduce the cost of transportation fuel to consumers.”

The agency said its primary consideration is whether such a change would improve the effectiveness of the program to achieve Congress’ goals.

“EPA believes that a change in the point of obligation would be a substantial disruption that has the potential to undermine the success of the RFS program, as a result of increasing instability and uncertainty in programmatic obligations,” the agency stated Nov. 10. “We believe that the proponents of such a change bear the burden of demonstrating that the benefits are sufficiently large and likely that the disruption associated with such a transition would be worthwhile. We believe that the current structure of the RFS program is working to incentivize the production, distribution, and use of renewable transportation fuels in the United States, while providing obligated parties a number of options for acquiring the RINs they need to comply with the RFS standards. We do not believe that petitioners have demonstrated that changing the point of obligation would likely result in increased use of renewable fuels.”

The agency also said changing the point of obligation would likely disrupt investments already made by those who have relied on the regulatory structure established in 2007 and reaffirmed in 2010, and delay future investments. Furthermore, EPA stated the change would “significantly increase the complexity of the RFS program, which could negatively impact its effectiveness” through confusion and uncertainty.

The American Petroleum Institute supports EPA denying the change. 

“We were pleased that based on data and thoughtful analysis EPA affirms our view and proposes to reject efforts to move the point of obligation,” said API Downstream Group Director Frank Macchiarola.

The American Fuel and Petrochemical Manufacturers association, however, submitted a petition to EPA Aug. 4 for the agency to consider changing the definition of obligated party.

The National Biodiesel Board has not taken a position on the point of obligation issue and had no comment on the EPA’s proposal to deny the change. 

EPA is specifically requesting comments that address whether changing the point of obligation in the RFS program would be likely to significantly increase the production, distribution, and use of renewable fuels as transportation fuel in the U.S., as well as any data that can substantiate those claims.