EPA Raises 2008 Renewable Fuels Standard

February 20, 2008 // Published as a news service by IHS

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The U.S. Environmental Protection Agency (EPA) raised the 2008 renewable fuels standard (RFS), which determines how much nonpetroleum fuel will power a vehicle, to 7.76%.

In November 2007, the EPA issued a RFS of 4.66% based on previous law that mandated at least 5.4 billion gallons of renewable fuels be blended into the nation's transportation fuels in 2008.

However, this year the EPA increased the standard to 7.76% to comply with the new minimum of 9.0 billion gallons of renewable fuel that the Energy Independence and Security Act of 2007 (EISA) requires.

EISA increases the overall volume of renewable fuels that must be blended each year reaching 36 billion gallons in 2022, said the EPA.

To achieve these volumes, the EPA annually calculates the percentage-based standard, which applies to refiners, importers and nonoxygenate blenders of gasoline. Based on the standard, each of these parties determines the minimum volume of renewable fuel that it must use, said the EPA.

The 2008 RFS is calculated by dividing the volume of renewable fuels required by the Clean Air Act (CAA), section 211(o) to be blended into gasoline in 2008 by the volume of gasoline projected by the Energy Information Administration (EIA) to be consumed in 2008 including certain adjustments specified by the act, according to the EPA.

EISA section 210(a)(1) also states that, "For calendar year 2008, transportation fuel sold or introduced into commerce in the U.S. (except in noncontiguous states or territories), that is produced from facilities that commence construction after the date of enactment of this act shall be treated as renewable fuel within the meaning of section 211(o) of the Clean Air Act only if it achieves at least a 20% reduction in life cycle greenhouse gas emissions compared to baseline life cycle greenhouse gas emissions."

EISA further provides that for 2008 and 2009, any ethanol plant that is fired with natural gas, biomass or any combination thereof is deemed to be in compliance with the 20% life cycle greenhouse gas reduction requirement, said the EPA.

Based on the text of this section, which is not an amendment to section 211(o) of the CAA and is not covered by the rulemaking provision in EISA section 202(a)(1) (amending section 211(o)(2)(A)(i)), the EPA said that these 2008 requirements are self-implementing and immediately effective.

The EPA said it will address the meaning of the term "commence construction" and also address what transportation fuels other than ethanol from a facility fired by natural gas, biomass or some combination of the two satisfy the 20% life cycle greenhouse gas reduction requirement in the context of a proposed rule designed to implement the EISA amendments to the RFS program.

However, the EPA said that it is unlikely that any facilities for the production of transportation fuel that commence construction following enactment of EISA will be operational during 2008. Therefore, the 20% life cycle greenhouse gas reduction requirement is unlikely to have a real-world impact for 2008.

While EISA requires a "substantial" change in the 2008 RFS, the EPA said it believes that the required renewable production capacity will come online this year. In addition, at current oil prices, the EPA said it expects it to be economic to use the volume of renewable fuel required by EISA for 2008.

The EPA also said Renewable Identification Numbers (RINs) generated in excess of the 2007 RFS can be applied to the 2008 RFS to provide additional flexibility to the fuel supply market. However, the EPA said it recognizes that in the short term there may be some catching-up required for the distribution infrastructure to deliver the required volume of renewable fuel.

Source: U.S. Environmental Protection Agency (EPA).