Renewable Fuel Standards -- RFS2
by B. A. (Ben) Thorp and Masood Akhtar, Bioenergy Deployment Consortium

The Energy Independence and Security Act 2007 (EISA), mandated that 36 billion gallons of renewable fuel be produced by 2022, and that the U.S. Environmental Protection Agency (EPA) issue regulations governing renewable fuels. These regulations were issued on March 26, 2010 as 40 CFR Part 80 Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program; Final Rule.

This new EPA rule, which is an upgrade to Renewable Fuel Standard 1 (RFS1) contained in the 2005 Energy Policy Act, becomes effective July 1, 2010, and is available at http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm. (Note: The page numbers are 14669-14904 and there is no Part I¹.)

This article summarizes the major RFS2 actions.

The first question to ask is, why do I need to know any of this? Reasons can range from increasing one's knowledge to helping guide personal investment to evaluating potential projects for your facilities. For those who thirst for knowledge, this document also contains official definitions (80.1401), green house gas (GHG) estimates, and economic impacts.

SUMMARY OF RENEWABLE VOLUME STANDARD
This new EPA rule revises the renewable fuel standards for the first several years but achieves the final 2022 goal. The adjusted 2010 goals are shown in the following (Table 1), along with the 2022 goals.

	Fuel Type	2022 goals Billion Gal.	2010 revised goals Billion Gal.	2010 goals as a % of total transportation fuel used in 2010
1	Cellulosic Biofuel	16	0.0065	0.004
2	Biomass-based Diesel	>1.0	1.152	1.102
3	Advanced Biofuel	21	0.95	0.61
4	Corn based ethanol	15	~10.85	~6.9
5	Total Renewable	36	12.95	8.25

Table 1: Renewable Fuel Types and Volumes

Cellulosic biofuel and biomass-based diesel (e.g. vegetable oil and animal fat based), are classified as advanced biofuels. Therefore, row 3 in Table 1 is a subtotal and includes the values in rows 1 and 2, for both 2010 and 2022. The total renewable fuel (row 5) is the sum of rows 3 and 4.

EPA set the 2010 cellulosic biofuel standard at 6.5 million ethanol-equivalent gallons (versus 100 million in EISA)³. Because the cellulosic standard is lower than the level otherwise required by EISA, EPA will also make cellulosic credits available to obligated parties for end-of-year compliance--should they need them--at a price of US$ 1.56 per RIN gallon. Refineries and importers will have to buy these credits if they do not acquire their share of RINs by buying biofuel.

Our cellulosic biofuel production estimate for 2010 is lower than EPA's and indicates the need to buy ~US$ 4 million in 2010 and over US$ 100 million in 2011, which will be lowered by lowering the 2011 standards. It is unclear how many years the standards will be lowered before Congress acts. This could very well attract petroleum-based companies to become more involved in renewable fuels. Despite lowering the 2010 cellulosic biofuel standard, EPA has maintained the advanced biofuel and total renewable standards for 2010 as set in EISA.

Under the new EPA rule there is a procedure for obtaining RINs, and each RIN represents one gallon of renewable fuel with no adjustment for the energy (BTU) content. Obligated parties (i.e. refineries, blenders and importers), are required to demonstrate, by February 28 of the following year, that they have enough RINs to satisfy the Renewable Volume Obligations (RVO) which is their percentage of production and/or import. 2010 is a transition year starting July 1, 2010, so both RIN1s (associated with RFS1), and RIN2s (associated with RFS2), will be used. In future years the final rule will be issued by November 30 for the RIN2s and RVOs, for the following year. The new EPA rule is a complex 236 page document that contains exceptions and detailed explanations.

EXPANDED COVERAGE
EISA expanded the RFS program beyond gasoline to cover all transportation fuels. This includes gasoline and diesel fuel intended for use in highway vehicles and engines, and non-road, locomotive and marine engines. It does not include jet fuel. These provisions apply to refiners, blenders, and importers of transportation fuel (with limited flexibilities for small refiners), and their percentage standards apply to the total amount of transportation gasoline and diesel they produce and import each year.

COMPLIANCE WITH RENEWABLE BIOMASS PROVISION
The definition of "renewable fuel" requires that it be made from "renewable biomass" feedstocks. This may prove to be one of the more onerous parts of implementing the regulation. The definition of "renewable biomass" used by EISA and the new EPA rule, restricts the types of biomass as well as the types of harvested land to the following:

• Planted crops and crop residue from agricultural land cleared prior to December 19, 2007, and actively managed or fallow on that date
• Planted tree and tree residue from tree plantations cleared prior to December 19, 2007, and managed on that date
• Slash and pre-commercial thinnings from non-federal forest lands that are neither old growth nor listed as critically imperilled or rare by a State Natural Hygene program
• Biomass cleared from the vicinity of buildings and other areas at risk of wildfire
• Separated yard and food waste
• Animal waste material and byproducts
• Algae

Of course, one can use any land and any biomass, but the fuel produced will not receive a RIN and likely not any federal incentive.

GREEN HOUSE GAS REDUCTION THRESHOLDS
A significant aspect of RFS2 is the requirement that the lifecycle greenhouse gas (GHG) emissions of a qualifying renewable fuel must be less than the lifecycle GHG emissions of the 2005 baseline average gasoline or diesel fuel that it replaces⁴. These lifecycle performance improvement thresholds are listed below (Table 2).

Fuel Type	% reduction
Renewable fuel after Dec 19, 20075	20
Advanced Biofuel	50
Biomass-based diesel	50
Cellulosic biofuel	60

Table 2. Fuel Type and GHG Reduction Requirements

EPA determined that:

• Ethanol produced from corn starch at a new (or expanded capacity from an existing) natural gas-fired facility using advanced efficient technologies (that should be most typical of new production facilities), complies with the 20 percent GHG emission reduction threshold⁵
• Biobutanol from corn starch complies with the 20 percent GHG threshold
• Ethanol produced from sugarcane complies with the applicable 50 percent GHG reduction threshold for the advanced fuel category
• Biodiesel from soy oil and renewable diesel from waste oils, fats, and greases complies with the 50 percent GHG threshold for the biomass-based diesel category
• Diesel produced from algal oils complies with the 50 percent GHG threshold for the biomass-based diesel category
• Cellulosic ethanol and cellulosic diesel (based on currently modeled pathways) comply with the 60 percent GHG reduction threshold applicable to cellulosic biofuels
• The expanded use of renewable fuels will reduce greenhouse gas emissions by 138 million metric tons when the program is fully implemented in 2022. The reductions would be equivalent to taking about 27 million vehicles off the road.

For additional information on the lifecycle GHG emissions methodology and results for renewable fuel pathways, and details on a petition process, refer to the Lifecycle GHG Analysis Fact Sheet, EPA420-F-10-006 or the RFS2 preamble.

PETROLEUM CONSUMPTION, ENERGY SECURITY AND FUEL COSTS
EPA estimates that the increased use of renewable fuels needed to reach the 36 billion gallons mandated by 2022, relative to market projections AND IN THE ABSENCE OF THE MANDATE, will displace about 13.6 billion gallons of petroleum-based gasoline and diesel fuel⁶. This represents about 7 percent of expected annual gasoline and diesel consumption in 2022. Furthermore, EPA expects the rule to decrease oil imports by US$ 41.5 billion, and to result in additional energy security benefits of US$ 2.6 billion. By 2022, the increased use of renewable fuels is expected to decrease gasoline costs by 2.4 cents per gallon and to decrease diesel costs by 12.1 cents per gallon.

AGRICULTURE SECTOR AND RELATED IMPACTS
In 2022, the increased use of renewable fuels is expected to expand the market for agricultural products such as corn and soybeans and open new markets for advanced biofuels. EPA estimates that RFS2 will increase net farm income by US$ 13 billion dollars in 2022. EPA also expects corn exports to decrease by 8 percent, and soybean exports to decrease by 14 percent. The rule is expected to increase the cost of food US$ 10 per person in 2022.

Contact B. A. (Ben) Thorp at: bathorp@comcast.net, and Masood Akhtar at: MAkhtar623@gmail.com.

¹ Private communication with David Korotney at EPA
² This is 2009 and 2010 combined, so some columns will not total
³ The authors have predicted that the U.S. will not produce 6.5 million gallons of cellulosic biofuel in 2010
⁴ EISA includes the first ever regulation of GHG
⁵ Older corn-ethanol plants are "grandfathered"
⁶ Different market estimates "in the absence of the mandate" look like the only way to explain a number as low as 13.6. Further review of the 1120 page Impact Analysis is required