EPA proposes major updates to RFS regulations

Source: By Erin Voegsel, Ethanol Producer Magazine • Posted: Tuesday, October 4, 2016

On Oct. 3, the U.S. EPA released its proposed Renewable Enhancement and Growth Support rule, which aims to enhance the renewable fuel standard (RFS) program and related fuel regulations to support the growth of ethanol and other renewable fuels.

The proposal includes an updated regulatory structure to allow biofuels producers to partially process feedstock at one facility and convert the resulting material into fuels at another using existing pathways. It also updates fuel regulations to allow expanded availability of high-ethanol fuel blends for use in flex fuel vehicles (FFVs) and includes new feedstock approvals for cellulosic biofuels produced from short-rotation poplar and willow, cellulosic diesel produced from compressing of cellulosic feedstocks and petroleum, and renewable diesel and biodiesel produced from non-cellulosic portions of separated food waste. In addition, the EPA said it is seeking comments on a variety of other issues, including renewable identification number (RIN) generation for renewable electricity used as transportation fuel and requirements for facilities that could use carbon capture and storage (CCS) to reduce carbon in the production of renewable fuels in the future.

Within the proposed rule, the EPA explains that the RFS registration, reporting, recordkeeping and product transfer document (PTD) requirements were designed with the general expectation that renewable biomass would be converted into renewable fuel at a single facility. As such, the RFS regulations impose requirements on producers to provide the EPA with information necessary to verify that their fuel was made with qualifying renewable biomass, through production processes corresponding with proposed pathways in and volumes corresponding to feedstocks used. Since current RFS regulations were implemented in 2010, the EPA said it has received a number of inquiries from companies regarding the possible use of renewable biomass that has been substantially preprocessed at one facility to produce a biointermediate feedstock that is used at a different facility to produce renewable fuel. The EPA offers Sweetwater Energy and Ensyn as examples of companies that have developed technologies using these biointermediates.

The EPA said it believes the use of biointermediates “is a reasonable and positive development in this developing industry and holds considerable promise for the future growth in production of the cellulosic and advanced biofuels.” The EPA also noted that while near-term production of biointermediates might be modest, there is significant potential for long-term growth, as the technologies could lower the cost of using cellulosic and other feedstocks by reducing storage and transportation costs associated with bulky feedstocks while taking advantage of existing ethanol and petroleum refinery assets to convert the biomass into fuel.

The EPA also explained that existing RFS provisions are insufficient to generally allow RINS to be generated in situations where multiple facilities are involved in the conversion feedstocks into fuel. The proposed rulemaking includes a set of requirements to enable the production and use of biointermediates to make fuel for which RINs can be generated.

According to the proposal, a biointermediate is defined as any renewable fuel feedstock material that is derived from renewable biomass; does not meet the definition of renewable fuel and RINs were not generated for it; is produced at a facility that is registered with the EPA, but is different than the facility at which it is used to produce renewable fuel; is made from the feedstock and will be used to produce renewable fuel in accordance with the processes listed in the approved pathway; and is processed in such a way that it is substantially altered from the feedstock listed in the approved pathway. Any feedstock listed in Table 1 of 40 CFR 80.1426 or an approved pathway pursuant to 80 CRF 80.1416 is not a biointermediate. Some examples of materials that are not considered a biointermediate include chopping biomass into small pieces, pressing it, or grinding it into a powder; filtering out suspended solids from recycled cooking and trap grease; degumming vegetable oils; drying wet biomass; or adding water to biomass to produce a slurry. For these materials exempt from the definition of biointermediates, the EPA said such activities can be conducted at a different facility than the facility producing fuel without triggering the need for additional recordkeeping, reporting, and registration requirements being proposed for producers of biointermediates. Similarly, the agency said separation activities required for yard waste, food waste or municipal solid waste (MSW) would not be viewed as creating a biointermediate.

For ethanol, the proposal would consider undenatured ethanol that is subsequently denatured at a separate facility as a biointermediate since current RFS provisions state ethanol does not become a renewable fuel until a producer adds denaturant. Under the proposed biointermediate definition, the EPA said the producer of undenatured ethanol would be required to register as a biointermediate producer and the party that denatured the ethanol would be required to register as a renewable fuel producer.

In addition to seeking comments on its biointermediate regulatory platform, the EPA is also seeking comments from potential producers of biointermediates on the current status of operations, potential production volumes, timelines for production and any other information that may help inform the agency as to the expected use of biointermediates to produce fuel in the future.

The proposed rule also includes a section dedicated to the development of a standard for ethanol flex fuel (EFF). According to the EPA, FFVs are designed to operate on any gasoline-ethanol mixture of up to 83 percent ethanol and currently represent approximately 8 percent of the U.S. passenger vehicle fleet. The agency said it is revising its gasoline regulations to make it clear E16-E83 fuel blends are not gasoline, and hence not fully subject to gasoline quality standards. The agency, however, said it will be putting in place standards that ensure the quality and environmental performance of EFF. According to the EPA, the agency believes these actions will clear the way for the expanded production and use of high-ethanol fuel blends at lower cost, and thereby the opportunity for increasing demand.

Within its proposed rule, the EPA explains that its various standards for gasoline apply to any fuel sold for use in motor vehicles, which is commonly or commercially known or sold as “gasoline.” The Fuel and Fuel Additive program requires that fuels EPA has designated as motor vehicle fuels must be registered with the EPA before being introduced into commerce. To date, the EPA has designated gasoline and highway diesel as motor vehicle fuels for the purposes of the F&FA program.

According to the rulemaking, gasoline ethanol blends of greater than 15 percent ethanol and less than 51 percent ethanol are relatively new to the marketplace. The EPA indicated that fuels composed of at least 50 volume percent clear gasoline are included in the gasoline family under the F&FA program. As a result blends of E15-E50 are currently subject to all of the requirements that apply to gasoline even though they may not be used in conventional gasoline vehicles. Ethanol blends of 51 to 83 percent ethanol have been sold for a number of years under the trade name E85. These blends belong to the ethanol family in the R&FA program and are not subject to EPA’s gasoline regulations.

The rule also explains that E16-50 blends are currently produced for use in FFVs using blender pumps at fuel retailer facilities by mixing E0 or E10 with E85. Because the EPA currently considers E16-50 to be gasoline and blender pump operators mix E85, a non-gasoline, with gasoline to produce E16-50, the agency said blender pump operators are considered gasoline refiners under its existing regulations. Similarly, the agency said E15 is also primarily produced at blender pumps and that fuel retailers that use E85 as a parent blend are currently subject to all of the requirements that apply to refiners producing gasoline from crude oil, including registration, reporting, and per-batch testing.

In the rulemaking, the EPA proposes to adopt provisions that would make minor amendments to its regulations so that gasoline ethanol blends of E50 and below that may not be used in conventional vehicles are treated in a similar way to E51-83 blends. The agency is also proposing fuel quality requirements for all EFF that would provide an equivalent level of emissions control when used in FFVs compared to the use of gasoline in conventional gasoline vehicles.

Regarding CCS, the proposed rule would require a renewable fuel producer seeking to use a pathway involving CCS to submit a CCS plan for review and approval by the EPA’s Office of Transportation and Air Quality. The fuel producer would also be required to provide a description of the CO2 capture and sequestration process and, if applicable, a description of the transfer process of the CO2 from the biorefinery to the sequestration facility. A variety of reporting and recordkeeping requirements would also have to be met.

The EPA’s proposal also includes new fuel pathways for ethanol and naphtha produced from short-rotation hybrid poplar and willow that converts cellulosic biomass into fuel for the generation of D3 cellulosic biofuel RINs. The EPA is also proposing to add fuel pathways for diesel, jet fuel and heating oil produced from short-rotation hybrid poplar and willow that converts cellulosic biomass to fuel for the generation of D7 cellulosic diesel RINs.

Another section of the proposed rule discusses methods in which RINs could be generated for renewable electricity used to fuel electric vehicles. Within the proposal, the EPA notes it has received a number of registration requests for approval under existing provisions for generating RINs for renewable electricity generated for biogas. The requests vary considerably in their approach. The EPA explained that regulations prohibit double-counting of RINs for the same quantity of renewable electricity. As a result, one party—either the electricity producer, the utility, or electric vehicle owner, the charging station or the manufacturer—would need to generate the corresponding RINs. The agency said it is seeking comments to aid in helping resolve the many issues associated with choosing an appropriate structure and design.

The final major section included in the proposed rule includes a variety of other proposed revisions to the RFS program. One proposed change would include revising how obligated parties report the total volume of gasoline and diesel they produce or import. That data is used to calculate annual renewable volume obligations (RVOs). In addition, beginning with the 2017 compliance year, obligated parties would be required to report heating oil volumes as part of their annual compliance reports.

Another proposed change involves the revision of fuel pathways for biomass-based diesel and advanced biofuel made from non-food grade corn oil. The EPA explains the lifecycle greenhouse gas (GHG) analyses for those pathways were based on its modeling for corn oil recovered from distillers grains with solubles (DGS) produced by a dry-mill corn ethanol plant through corn oil extraction. The EPA is proposing to revise the pathways to specify the feedstock is oil from corn oil extraction and to include a revised and somewhat broadened definition of corn oil extraction.

In addition, the EPA is proposing to approve a pathway for the use of non-cellulosic portions of separated food waste to produce biodiesel, along with a pathway using the same feedstock for renewable diesel.

Also within the rulemaking, the EPA proposes to make additional changes to the registration requirements for new and expanded grandfathered volumes; proposes to amend regulations to allow flexibilities for renewable fuel blending for military use; proposes amending the current definition for heating oil to allow for heating oil used for cooling; proposes to amend RFS registration procedures for separated food waste plans; proposes to more explicitly outline certain registration, reporting and RIN generation requirements for fuel producers that transfer the ownership of a facility that was registered immediately preceding the sale; proposes changes to the requirements for independent third-party professional engineers and electronic submission of engineering reviews; proposes additional circumstances in which the agency may deactivate the registration of a company, third-party auditor, or third-party engineer; proposes changes for the registration of biogas producers; proposes creating a new section in the RFS regulations for RIN retirements; proposes a new pathway for the coprocessing of biomass with petroleum to produce cellulosic diesel, jet fuel and heating oil; proposes two regulatory definitions for vegetable oil that differentiate between its use as a feedstock and its use as a renewable fuel; proposes regulations that would streamline the agency’s processing of claims that RFS-related information should be withheld from public disclosure under the Freedom of Information Act; proposes changes related to certain grandfathered facilities; proposes changes to bond requirements for foreign producers; and proposes redesignation of renewable fuel on a PTD or non-qualifying uses. The proposed rule includes several additional revisions to existing regulations.

The Renewable Fuels Association has weighed in on the proposal. “We are still reviewing the proposal and will be submitting detailed comments to EPA,” said Bob Dinneen, president and CEO of the RFA. “Our goal is to ensure the final regulations do not unreasonably impair the ability of blenders and retailers to offer ethanol flex fuels like E85 to consumers. Ethanol flex fuels are the lowest-cost, lowest-carbon, and highest octane liquid fuels on the market, and it is imperative that these EPA regulations help—not hinder—broader commercial introduction of these fuels.”

Growth Energy has also released a statement on EPA’s proposed rule. “While we are reviewing the details of the rule, we are concerned about the impact of this proposal on the hundreds of retailers who are successfully selling E15 in the marketplace today,” said Emily Skor, CEO of Growth Energy. “If this proposed rule is finalized, this regulation would leave E15 as the only ethanol-blended fuel that does not have Reid Vapor Pressure (RVP) relief. RVP is the measure of a fuel’s volatility and EPA regulates vapor pressure/RVP to prevent increased ozone or smog from vehicle emissions.”

“It is imperative that E15 be given the same volatility treatment as regular E10 gasoline,” Skor continued. “The current RVP waiver for E10 was granted in 1990, and it is time we update our fuel regulations to match the market realities of the 21stcentury. E15 burns cleaner, has reduced tailpipe emissions and particulate matter, and reduces smog and other harmful emissions. Growth Energy continues to take the lead on a legislative fix to the RVP issue and will provide significant comments to EPA to ensure that consumers continue to have access to higher blends of ethanol fuels.”

A 60-day public comment period on the proposal will be open following its publication in the Federal Register. A pre-publication of the proposed rule can be downloaded from the EPA’s website.