Following several recent high-profile enforcement cases that
invalidated more than 140 million biomass-based diesel renewable identification
numbers ("RINs") because no renewable fuel was actually
produced, the U.S. Environmental Protection Agency has proposed a new voluntary quality
assurance program for use by RIN purchasers to ensure that the RINs
are valid. EPA has indicated that its purpose in developing the
program is to ensure that certain smaller biodiesel producers who EPA claims were shut
out of the RIN market based on concerns about the validity of their
RINs could continue to freely market their RINs.
Under EPA's Renewable Fuel Standard program, a specified
volume of renewable fuels must be used for
transportation fuel, home heating oil, and/or jet fuel in the U.S.
each year. EPA establishes a yearly percentage of the total volume
of all gasoline or diesel fuel produced or imported that must be
renewable fuels, also referred to as "renewable volume
obligations" ("RVOs"). Refiners and importers then
meet that standard by acquiring RINs from biofuel producers.
The regulations prohibit invalid RINs being used to achieve
compliance with RVOs, even if the RINs were purchased with a
good-faith belief that they were valid. This means that purchasers
of invalid RINs are obligated to incur additional costs in
purchasing additional valid RINs to meet RVOs.
Pursuant to the voluntary program proposed by EPA, a
purchaser's first option is to purchase RINs that have been
verified as valid by third-party auditors using a fairly detailed
quality assurance plan approved by EPA. The third-party auditor,
rather than the purchaser, would be responsible for replacing any
RINs later found to be invalid. The purchaser would have an
affirmative defense to a civil enforcement action by establishing
that it did not know or have reason to know that the RINs were
invalid at the time they were verified.
The purchaser's second option is to purchase RINs that have
been verified by a third-party auditor using a less rigorous
quality assurance plan. The purchaser would have responsibility for
any RINs found to be invalid, but the purchaser would have an
affirmative defense to an enforcement action if the purchaser could
establish that it did not know or have reason to know that the RIN
was invalid at the time the RIN was used for compliance or
transferred to another party.
Purchasers would also have a final option of not using any
third-party auditors to verify RINs. In this case, the purchaser
would remain obligated to replace any RINs later found invalid,
consistent with the current regulatory scheme.
Although EPA is still reviewing public comments received on the
proposal rule through April 18, 2013, EPA is implementing some
portions of the proposed rule immediately. To that end, EPA issued
a revised enforcement policy on January 31,
2013 stating that it does not intend to seek enforcement against
purchasers who use RINs in 2013 that have been verified in
accordance with the proposed rule and who meet the other
requirements outlined in the enforcement policy. EPA has indicated
that it intends to finalize this rule "well in advance"
of the February 28, 2014 compliance date for 2013 RVOs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
