Frequently Asked Questions
What is the Renewable Fuel Standard?
The Renewable Fuel Standard (RFS) is a federal law that requires a certain amount of renewable fuels be blended into the U.S. fuel supply each year. The Environmental Protection Agency (EPA) administers the program.
Why did Congress enact the RFS?
Congress enacted the RFS to reduce America’s reliance on foreign crude oil by increasing the use of domestic, environmentally friendly renewable fuels in our gasoline and diesel supply.
What is a Renewable Identification Number (RIN)?
Renewable Identification Numbers are used by an “obligated party” to demonstrate to the Environmental Protection Agency (EPA) that it has complied with the RFS. RINs are essentially credits issued to prove that a gallon of gasoline or diesel has been blended with renewable fuel. The EPA mandates how many RINs must be turned in by obligated parties each year.
For more specific details, please read the EPA’s explanation of RINs and how the credits are supposed to work under the RFS program.
How does the RFS program work?
Each year, obligated parties must turn in a specific number of RINs to the EPA to demonstrate that the required volume of renewable fuel was blended into the U.S. transportation fuel supply that year. RINs are generated when renewable fuel, like ethanol, is blended with gasoline and diesel. The burden of compliance with the RFS falls on refiners and importers – the obligated parties – even though many don’t actually blend much of the fuel they produce. Instead, blending is done by wholesalers, marketers and retailers, who can sell their RINs to obligated parties in a completely unregulated market.
Why can’t some refiners blend renewable fuel into the products they make?
The obligation for compliance is placed on refiners and importers regardless of whether they have the ability to affect the amount of renewable fuels blended and sold to consumers. Merchant refiners and small refiners, who produce roughly half of all gasoline and diesel sold in the U.S., don’t control the amount of renewable fuels that are blended and sold to consumers. These refiners primarily operate refineries and sell their refined products at the pipeline interface to third parties who operate downstream blending terminals and retail outlets.
These refiners cannot blend a significant portion of the fuel they produce because they rely in large part on pipelines to transport their products, and pipeline operators typically do not allow shipment of transportation fuels that have been blended with renewable fuels. As a result, they rely almost entirely on purchasing RINs from third parties to satisfy their compliance obligations under the RFS.
Is the RFS program a success?
No. Renewable fuel blending targets are not being met, and the cost of RINs has skyrocketed, resulting in enormous and unsustainable compliance costs that were never envisioned when the law was enacted. Further, America is no longer reliant on foreign crude oil due to the shale revolution and advances in other forms of renewable energy.
The RFS, as it stands now, is a seriously flawed and broken program. The law has failed on many fronts, which is detrimental to the American consumer.
– Rather than improve energy security, it harms it by threatening the viability of merchant refiners and small refiners, who supply roughly half of all the gasoline and diesel used in the United States. American consumers will be harmed by rising gas prices if these refiners close their doors.
– The shale oil revolution has provided America’s energy independence (not the RFS program). Today, we export crude oil and refined products at RECORD levels.
– We now import foreign biofuel, but the intent of the law was to use domestic products.
– EPA’s management of this program hinders rather than incentivizes additional renewable fuel use.
Because of the contrived, unregulated and sometimes fraudulent RIN credit trading program used in the RFS, the fuels industry has been divided into big winners and big losers, which drastically reduces competition and can ultimately cause gasoline and diesel prices to rise.
What is the solution?
Short of repealing the law, the EPA can fix many of the problems that are currently plaguing the program by making ALL BLENDERS comply with the RFS.
The EPA has been warned for many years and has chosen to ignore a fundamental flaw in the RFS that is preventing the program from working as intended – the Blender Loophole. The EPA has required refiners and importers, but not blenders, to be the parties legally obligated to comply with the RFS. By leaving blenders exempt, the EPA has placed the obligation on the parties least able to affect renewable fuel use.
The EPA’s mismanagement of the program has resulted in a giant loophole that is discouraging the increased use of renewable fuels while creating windfall profits for the exempt blenders. If the blender loophole were closed, blenders would have both a legal obligation and a financial incentive to increase renewable fuel use, the same as refiners and importers, and the RFS would have a better chance of working as intended. This would benefit consumers, as well as the many companies involved in the program.
This not only is an obvious solution, it is the law. Each year, the EPA is required by law to make the “appropriate” persons responsible for complying with the program. It is time for the EPA to follow the law and make all blenders responsible for compliance.
What can I do to help fix the RFS?
The problems with the RFS are pervasive. Sometimes, even good intentions just go bad. Such is the case with the RFS, which reflects many years of EPA mismanagement.
The EPA has the responsibility to ensure the program is meeting the goals set by Congress, which today it is not. Even after extensive outreach from stakeholders and the public, the EPA recently proposed to deny requests to make ALL BLENDERS responsible for complying with the RFS. However, the agency has opened a public comment period for consumers and industry members to make their voices heard. The deadline for public comments has been extended until Feb. 22, 2017.
Send a message to the EPA today and let them know the RFS is broken and needs to be fixed. Tell them that it’s time to make ALL BLENDERS responsible for complying with the program. The EPA’s mismanagement of the program is hurting consumers, merchant refiners, small refiners and small retailers. Your voice is critical in bringing sensible, consumer- and business-friendly reforms to this broken program.