EPA Establishes Rules for the National Renewable Fuel Standard

April 18, 2007

The U.S. Environmental Protection Agency (EPA) established the nation's first comprehensive Renewable Fuel Standard (RFS) program on April 10th. The RFS was mandated by the Energy Policy Act of 2005, and requires that by 2012, the equivalent of at least 7.5 billion gallons of renewable fuel be blended into motor vehicle fuel sold in the United States. The RFS program is based on a credit trading system that provides a flexible means for industry to comply with the annual standard by allowing renewable fuels to be used where they are most economical, and it also allows the use of various renewable fuels to meet the minimum requirements. By 2012, the program is estimated to cut petroleum use by up to 3.9 billion gallons and cut annual greenhouse gas emissions by up to 13.1 million metric tons, the equivalent of removing 2.3 million cars from the road.

The RFS program requires major refiners, blenders, and importers in the contiguous United States to use a minimum volume of renewable fuel each year between 2007 and 2012. The minimum level is determined as a percentage of the total volume of fuel a company produces or imports and will increase every year. For 2007, 4.02 percent of all the fuel sold or dispensed to U.S. motorists will have to come from renewable sources, equal to roughly 4.7 billion gallons of renewable fuels. That amount was already exceeded in 2006, when the ethanol fuel industry produced 4.86 billion gallons of ethanol, and new and expanded plants now under construction are expected to push the annual production of ethanol well above the RFS requirement. However, the RFS program will guarantee a minimum market for renewable fuels in the event of an industry downturn, and it was welcomed by the Renewable Fuels Association (RFA). See the DOE press release, the EPA rules, and the RFA press releases on the RFS and on the industry's ethanol production in 2006.

The EPA gave the ethanol fuel industry an additional boost last week, when it set emissions rules for the ethanol fuel plants equal to those for facilities producing ethanol for consumption. The final rule also will no longer require facilities that use carbohydrate feedstocks in producing ethanol to count fugitive emissions of regulated pollutants when determining if they meet or exceed their emissions limits. Fugitive emissions are emissions that do not come from process stacks or vents. This change may allow some plants to expand production. The rule will also allow new ethanol facilities to emit up to 250 tons of regulated pollutants per year in areas that are not known to be exceeding EPA's air quality standards and that are not in an Ozone Transport Region, a region where ground-level ozone is a pervasive problem. See the EPA press release, the EPA summary of the changes, and the full 118-page final rule (PDF 221 KB). Download Adobe Reader.