Fuels Alert

Date: Sep 24, 2012

EPA Increases 2013 Biodiesel Mandate by Nearly 30 Percent

EPA's Administrator Jackson signed a final rule on September 14, 2012, requiring the use of 1.28 billion gallons of biomass-based diesel (commonly referred to as "biodiesel") in transportation fuel sold in the U.S. in 2013, a nearly thirty percent increase from this year's requirement. Section 211(o) of the CAA requires EPA each year to promulgate national standards for different types of renewable fuel based on a variety of factors, including the total Renewable Fuel Standard ("RFS") specified by Congress, production capabilities and the distribution infrastructure.

In addition, by November 30th, EPA will have to specify the percentages of the different types of renewable fuel, including biodiesel, that refiners, blenders, and importers must introduce into commerce out of their total production volumes. While EPA asserts that "producers of biodiesel . . . have significantly greater production capacity than will be required by today's final rule," a recent petition by the governors of several states indicates that this may not be the case for other types of renewable fuel. The petition requests that EPA waive "an appropriate volume" of the RFS due to this year's drought, crop price increases, and impacts on the poultry, cattle and various other economic sectors. EPA discussed these petitions in its August 30, 2012, notice and extended the comment period to October 11, 2012.

EPA Revises Sulfur Diesel Requirements and Definition of Renewable Heating Oil

Administrator Jackson also signed a direct final rule on September 17, 2012, to amend the definition of "heating oil" in 40 CFR § 80.1401 of the RFS regulations. The revised definition expands the types of heating oil that can be produced to generate Renewable Identification Numbers ("RINs"). As we explained in our April 12, 2012, Fuels Advisory, RINs are the mechanism through which refiners, blenders and importers of fuel demonstrate compliance with the RFS. The revised definition will now allow companies to generate RINs from heating oil used to warm buildings or other facilities where people live, work, recreate, or conduct other activities. The rule also amends the yellow marker requirements for 500 ppm locomotive and marine diesel fuel and heating oil. It will take effect within 60 days of publication in the Federal Register, unless EPA receives, within 30 days of publication, an adverse comment or request for a public hearing.

EPA Finalizes Amendments to Petroleum Refinery NSPS for Flares and Process Heaters

EPA has finalized amendments to the new source performance standards ("NSPS") for petroleum refinery process heaters constructed, reconstructed, or modified after May 14, 2007, and flares constructed, reconstructed or modified after June 24, 2008. The September 12, 2012, final rule imposes concentration-based nitrogen oxide ("NOX") emissions limits and alternative heating value-based NOX emissions limits on process heaters. The amended NSPS also provides an alternative compliance option allowing refineries to seek EPA approval for a site-specific NOX emissions limit for certain process heaters. In addition, the rule lifts the stay on the definition of "flare," thereby classifying it as a separate affected facility within a petroleum refinery. As a separate facility, flares are not subject to the sulfur dioxide performance standards, but must meet a new set of flare standards. The rule also clarifies monitoring requirements. The final rule will become effective November 13, 2012.

EPA Considers New Renewable Fuel Production Process

EPA announced that it is reviewing a petition filed by Dakota Spirit AgEnergy ("Dakota") under the RFS regulations for a new renewable fuel production process. EPA must evaluate the greenhouse gas emissions reduction achieved by using steam from a combined heat and power ("CHP") system located at an offsite, adjacent coal-fired power plant in Dakota's renewable fuel production process. The Agency has proposed to allocate emissions based on the amount of electricity that the steam would have produced had it not been diverted for use at the biorefinery. Comments on this proposed methodology and any alternative approaches are due October 11, 2012.