On May 5, 2009, the Administrator of the Environmental Protection Agency (the “EPA”) released proposed rules based on changes that the Energy Independence and Security Act of 2007 (“EISA”) made to the Renewable Fuel Standard (“RFS”). These proposed rules establish a new regulatory scheme (“RFS 2”) for renewable fuels under the Clean Air Act (the “CAA”). Upon the printing of the rules in the Federal Register (which occurred on May 26, 2009), a 60-day public comment period commenced, which has now been extended to September 25, 2009. During this period, the EPA is gathering comments in writing and holding related public hearings and workshops. After the period has ended, the EPA will revise the proposed rules and publish a final version. It is noteworthy that this Notice of Proposed Rulemaking (the “NPRM”) introduces an unusual level of regulatory uncertainty in that the EPA has left multiple issues unresolved either by proposing alternative versions of provisions or by explicitly leaving unresolved issues open for public comment. This chapter was drafted during the period of the public rulemaking. As such, there remain substantial unresolved regulatory issues that will have significant impact on the algae biofuels industry. Given this context, this chapter provides an analysis of the proposed regulations as presently drafted and indicates key areas of controversy that may yield changes to the rules and impact the algae biofuels industry.
While the EPA has proposed to leave significant portions of the existing RFS regulatory system (“RFS 1”) in place, the proposed RFS 2 rules represent a major overhaul of the current program. Whatever changes are made as a result of the public comment period, the impact of the final version of the RFS 2 rules will be quite substantial on the biofuels industry. In many respects, the proposed rules are interrelated such that the new framework established by the RFS 2 program must be examined as a whole to effectively analyze the cost impacts and regulatory issues that are of primary importance to the algae biofuels industry: the fuel categories, the methodology used to calculate lifecycle greenhouse gas (“GHG”) emissions, the factors impacting the value of Renewable Identification Numbers (“RINs”), and the extent of obligations imposed on the algae biofuels industry under the new program. RINs are the unique numbers assigned to qualifying renewable fuel under the program and are used to show compliance by obligated parties.
RFS 2 Program Overview, Scope, and Implementation Dates
Renewable Fuel RIN Categories and Factors Impacting Value of RINs
Renewable Biomass Mandate
GHG Emission Analysis and Fuel Pathways
Key Additional Provisions and Issues