Transcript RFS_Biodiesel

HOW RFS QUALITY
REQUIREMENTS WILL IMPACT
BIODIESEL PRODUCERS
Douglas L. Batey and Graham Noyes
Stoel Rives LLP
600 University Street, Suite 3600
Seattle, Washington 98101
206-386-7679, [email protected]
206-386-7615, [email protected]
RFS Overview
• EPA sets standards for increasing the
percentage of renewable fuels for motor
vehicles
• Obligated parties: refiners or importers of
gasoline in the 48 states
• Demonstrate compliance by owning
sufficient credits to show the required
percentage of their total gasoline imported
or produced
• Credits implemented through Renewable
Identification Numbers (RINs) for each batch of
renewable fuel
RINs
• A 38-digit number, containing coded information
about the producer and the equivalent number of
gallons of renewable fuel represented by the RIN
• Producers and importers must generate a RIN for
each batch of renewable fuel produced or imported
• Must be listed on product transfer documents, and
reported quarterly to EPA.
Examples of RIN:
Transferability of RINs
• Become freely transferable only after separation
from the renewable fuel.
• RINs are separated only by the obligated party or by
the blender (if blended into gasoline or diesel)
• After separation, RINs are freely transferable and
may be owned by any party.
– Parties holding RINs must be registered with the EPA and
must report to the EPA
• Obligated parties may acquire RINs to satisfy their
volume requirements by buying renewable fuel or by
buying RINs
• RINs have VALUE
What About Biodiesel?
• Biodiesel producers and importers must
generate RINs and must register with the
EPA
• RINs for biodiesel (mono-alkyl ester) have
a gallon equivalence value of 1.5, nonester renewable diesel has a gallon
equivalence value of 1.7
• RINs are separated from the biodiesel
when it is blended or exported, and are
then freely transferable and can be sold
Biodiesel Quality
• EPA fuel regulations require that motor
vehicle fuels and refiners be registered
under 40 CFR part 79
– Testing data is required
– Biodiesel typically relies on compliance
with ASTM D-6751and testing data of
NBB
• RFS defines “biodiesel” as fuel that is registered with EPA
under 40 CFR part 79 and that meets ASTM D-6751
– ASTM D-6751 specifications: flash point,
distillation temperature, viscosity, sulfur,
copper strip corrosion, cetane, cloud point,
carbon residue, free glycerin, phosphorous,
etc.
Noncompliance With ASTM D-6751
• The fuel would not meet the RFS’s definition of “biodiesel”
• The RIN would have reported the fuel as biodiesel and
therefore the RIN would be invalid.
• Each party buying or selling the biodiesel or the RIN (after
separation) would have acquired, passed on, and reported
using the invalid RIN
• The originator and each transferor of the invalid RIN
would have violated the RFS
• An obligated party may find itself in
violation of its annual volumetric
requirement for using
invalid RINs.
More Consequences
• A party who causes another party to be in
violation will be liable for the violation
• Violators are subject to a civil fine of up to
$32,500 per day of each violation plus any
economic benefit or savings from the violation
• A parent corporation is liable for any violations
committed by its subsidiary
• RESULT: A CASCADE OF
REGULATORY PROBLEMS AND
POTENTIAL FINES
Quality Problems- 2005
•
NREL (National Renewable Energy Laboratory) Completed
Biodiesel Quality Control Survey in 2005
•
Collected 27 B100 samples and 50 B20 samples from various
downstream locations
•
15% of B100 samples did not meet ASTM D6751
•
Most failed due to glycerin and acid number
•
18 of the 50 B20 blends contained either less than 18% or more
than 22% biodiesel. B20 samples ranged from 9% to 98%
biodiesel
•
This survey preceded RIN requirements
2007 Quality Survey
• Contacted 107 producers
• Received samples from 56
• 90% of product in specification
• Large Volume Producers: 99% in spec
• Medium Volume Producers: 32% in spec
• Small Volume Producers: 28% in spec
• BQ 9000 Producers: 98% in spec
What is BQ9000
• Quality Control and Documentation Program Similar
to ISO 9000 program
• Tailored to Biodiesel Industry
• Administered by BQ 9000 Accreditation Committee
• Producer and Marketer Categories
EPA Enforcement
• Biodiesel that does not meet ASTM specification
D6751 is not entitled to RIN credit
• Similarly, non-ASTM specification fuel is not entitled
to Blender’s Credit
• No known EPA enforcement actions for out of
specification fuel
What to Do
• Keep up to date on Developments
– Stoel Rives Law Bulletins
– NBB website or newsletter
• Source from high quality suppliers:
– BQ 9000 and/or
– Large Volume Producer
• Address Risk Contractually
– Responsibility for Fuel Quality
– Storage and Handling Requirements
– Supplier liability for consequential damages for
out of specification fuel