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June 28, 2013

EPA Proposes Amendments to Renewable Fuel Standard

The ACTA Group

On June 14, 2013, the U.S. Environmental Protection Agency (EPA) published a proposed rule to amend the Renewable Fuel Standard. The proposal would allow use of biogas from landfills to meet the obligations imposed on refiners and importers to utilize renewable feedstocks in transportation fuels, and clarify which renewable biofuels can be categorized as cellulosic biofuels. The Renewable Fuel Standard (known as RFS2) was first promulgated in 2010. RFS2 implements requirements for the use of renewable fuel adopted by specific amendments to the Clean Air Act that were included in the Energy Independence and Security Act of 2007.

In general, RFS2 requires fuel refiners and importers to meet certain quantitative standards for renewable fuel use. Fuels or fuel constituents are considered to be renewable if they are derived from renewable biomass; supplant conventional transportation fuels, heating oil, or jet fuel; and have lifecycle greenhouse gas (GHG) emissions that are 20% less than baseline emissions. There are separate targets for renewable fuels derived from cellulosic sources (which include crop residue, tree residue, and certain cultivated crops) because these fuels are considered to be particularly beneficial in reducing lifecycle GHG emissions. To be classified as cellulosic biofuel, a fuel or fuel constituent must have lifecycle GHG emissions that are 60% less than baseline emissions. Refiners and importers satisfy their quantitative obligations under RFS2 by producing or purchasing renewable fuels or fuel constituents that have been assigned Renewable Identification Numbers (RIN) based on their origin.

The amendments EPA proposed include various changes to RFS2 to allow biogas produced from landfills to be treated as cellulosic biofuel. Landfills generate methane as a result of the anaerobic decomposition of waste. EPA has previously determined that landfill biogas can be used to generate RINs, but EPA has now determined that approximately 90% of landfill biogas comes from cellulosic sources. Based on this determination, EPA is proposing to amend RFS2 to allow landfill biogas to be used to meet the quantitative standard for cellulosic biofuel. EPA is also proposing to add new pathways for use of landfill biogas in producing renewable transportation fuels, including renewable naphtha, renewable diesel, and renewable electricity used in electric vehicles.

Methane is a particularly potent GHG (more than 20 times more potent by weight than carbon dioxide), so it is important to control as many sources of methane emissions as practicable. Existing EPA regulations require that larger landfills capture and control their methane emissions. To comply with these regulations, landfills can combust their methane through flaring, which results in conversion of the methane to carbon dioxide but wastes the energy content. As an alternative, some of the regulated landfills use the captured methane to generate electricity. Smaller landfills do not capture or control the methane they generate, which is typically vented directly to the atmosphere.

The amendments proposed by EPA for use of landfill biogas will serve two general purposes. First, they will provide another means by which fuel refiners and importers can meet the quantitative requirements for cellulosic biofuels. Second, they will encourage more landfills to capture and utilize their methane emissions to generate energy. Those landfills that currently flare their methane will have new economic incentives to generate electricity or to market their biogas for use in fuel production. Landfills that currently vent their methane without capture or control will have new incentives to reduce their methane emissions and put their biogas to productive use.

EPA is also proposing to clarify the volumes of fuel that are generated from cellulosic sources that can be assigned RINs as cellulosic biofuel. At present, there is confusion as to whether all of the fuel derived from cellulosic waste, such as crop or wood residue or cultivated crops such as switchgrass, can be classified as cellulosic biofuel, or whether only that portion of the fuel volume that is actually derived from cellulose, hemicellulose, or lignin is eligible. The principal cellulosic sources generally have an average cellulosic content of 85%, and other constituents such as starches and sugars typically do not contribute appreciably to the total volume of renewable fuel derived from such sources. EPA is proposing to allow 100% of the fuel derived from certain specified cellulosic sources, including crop residue, slash, pre-commercial thinnings and tree residue, annual cover crops, switchgrass, miscanthus, and energy cane, to qualify as cellulosic biofuel. This would not include renewable fuels made from non-cellulosic crops such as corn and soybeans.

Unless a hearing is requested by July 1, 2013, comments on the proposed amendments to RFS2 will be due by July 15, 2013. If a hearing is requested, EPA will establish a new deadline for submission of public comments.