The new rules implement provisions of the Energy Policy Act of 2005. The rules specify the total volume of renewable fuel that must be used in gasoline in the United States each year, starting September 1, 2007, with the volumes increasing each year. In a nutshell, the RFS requires "obligated parties" (gasoline refiners and gasoline importers) to show that they have purchased renewable fuel equal to or exceeding a specified percentage of their total gasoline production or imports for that year. Alternatively, an obligated party can achieve the required percentage through a combination of renewable fuel purchases and credits purchased from others. The required percentage for 2007 is 4.02 percent. Each refiner and each gasoline importer must show its compliance with the percentage standard each year.

Gasoline refiners and importers demonstrate compliance by showing that they have acquired sufficient credits. Credits are acquired by purchasing renewable fuel or by purchasing credits from others. The credits are called Renewable Identification Numbers (RINs), and each RIN is generated by a renewable fuel producer or importer. A RIN is a 38-digit number that includes coded information about the producer and the facility, and includes the equivalent number of gallons of renewable fuel it represents. A RIN must be generated for each batch of fuel sold by the renewable producer. The RIN must be listed on the product transfer documents, and reported quarterly to the EPA. The number of gallons included in the RIN for one batch of renewable fuel must be less than 100 million, and cannot exceed one calendar month’s production of the facility.

A RIN is not separated from its original batch of renewable fuel until the fuel is purchased by an obligated party or a blender. At that time the obligated party can retain the RIN and use it to report compliance with the RFS, or the obligated party or blender can sell the RIN to any party that is registered under the RFS.

The RFS defines "renewable fuel" as any motor vehicle fuel produced from grain, oilseeds, fish or animal matter, or other biomass, or from natural gas produced from a biogas source, such as a landfill, sewage plant or feedlot. Fuel used in boilers or heaters is excluded from the definition of renewable fuel. Most types of renewable fuel count towards the refiner’s or importer’s annual volume obligation on a gallon-for-gallon basis, but certain types of renewable fuels have a higher equivalence value and are counted at a higher ratio than one-for-one. Here are the higher equivalence values:

Cellulosic biomass ethanol Waste-derived ethanol Biodiesel (mono-alkyl ester) Non-ester renewable diesel Butanol

2.5 2.5 1.5 1.7 1.3

The number of gallons counted in a RIN is the product of the actual number of gallons of renewable fuel in that batch multiplied by the equivalence value for that type of fuel. For example, a RIN for a batch of 10,000 gallons of cellulosic biomass ethanol will list 25,000 gallons because of that fuel’s higher equivalence value. An obligated party buying that batch of ethanol will then receive the same credit towards its annual volume requirement as if it had bought 25,000 gallons of grain ethanol.

The RFS imposes registration and reporting requirements, summarized below, on (a) gasoline refiners and importers; (b) blenders, producers, importers, and exporters of renewable fuels; and (c) owners of RINs. Those parties are also subject to record-keeping obligations and an annual attestation requirement. Producers of cellulosic biomass ethanol or waste-derived ethanol are additionally required to have an annual verification of their status performed by a licensed professional chemical engineer.

Registration

• Effective September 1, gasoline refiners and importers, and exporters of renewable fuel, must register with the EPA before engaging in any transaction involving RINs. Many of these parties are already registered with the EPA, which will satisfy this requirement.
• Importers and producers of renewable fuel must register with the EPA before generating or assigning any RINs. They must therefore register before carrying out any sale or export of renewable fuel.
• Blenders of renewable fuel with gasoline, and any other party not listed above that owns or intends to own RINs, must register with the EPA before owning any RINs. Blenders must therefore register before buying any renewable fuel for blending, if they are not already registered with the EPA.

The registration process uses the same forms used by the EPA under the reformulated gasoline and anti-dumping program. Forms and instructions may be downloaded from http://www.epa.gov/otaq/regs/fuels/rfgforms.htm.

Reporting
Quarterly and annual reports must be filed with the EPA. The reports required of each type of party are:

Refiners and importers of gasoline, and exporters of renewable fuel	Producers and importers of renewable fuel	Blenders and other parties that own RINs during the reporting period
• RIN transaction report • Gallon-RIN activity report • Annual compliance report	• RIN transaction report • Gallon-RIN activity report • RIN-generation report	• RIN transaction report • Gallon-RIN activity report

Other than the annual compliance report, all reports are due quarterly. Quarterly reports are due at the end of the second month after the end of each calendar quarter. For 2007, the initial quarterly reports are due November 30. The annual compliance report is due May 31, 2008 for 2007, and will be due each February 28 thereafter.

Reporting forms and instructions may be downloaded from http://www.epa.gov/otaq/regs/fuels/rfsforms.htm.

For more information, contact Ashley Henry, Stoel Rives, 503-294-9506, ahenry@stoel.com