Cowen and Company Renewable Fuels Summit What is RFS2: A Primer June 3, 2013 New York, NY Sandra Dunphy Director, Energy Compliance Weaver and Tidwell, L.L.P. 0
Overview of the RFS Program • History • RFS2 Mandates • Renewable Fuel Production • RINs • Renewable Volume Obligations • Intended/Unintended consequences • Outlook/Issues 1
History of RFS2 • August 2005: Energy Policy Act of 2005 enacted – Established use of 7.5 BG of renewable fuels (RF) by 2012 • 2006 volume handled through “collective” compliance approach – Goals of program: • Energy security; economic benefits – jobs; air quality benefits • Sep 1, 2007: RFS1 regulatory program begins – Compliance and trading program based on a Renewable Identification Number (“RIN”), i.e. credit – Obligations are based on gasoline production • Dec 19, 2007: Energy Independence and Security Act (EISA) – Requires 36 BG of renewable fuel made from “renewable biomass” by 2022 • 4 “nested” volume mandates: RF, Advanced Biofuel (AB), Biomass ‐ based Diesel (BBD) and Cellulosic Biofuel (CB) • February 3, 2010: EPA signs final rule to implement RFS2 – Effective July 1, 2010 (except for Renewable Volume Obligation calculations – Renewable fuel feedstock focus now switches to “renewable biomass” – Implements cellulosic biofuels and biodiesel requirement – Obligations are now based on gasoline AND diesel fuel production 2
RFS2 Renewable Fuel Volumes GHG Reduction 40 Advanced Biofuel: Unspecified E~30 Advanced Biofuel: Biomass-Based Diesel 35 Advanced Biofuel: Cellulosic Biofuel 50% Conventional Biofuel (corn ethanol) 30 E ‐ 15 Billion Gallons 25 E ‐ 10 60% 20 15 10 CORN ETHANOL 20% CAPPED AT 15 BG/YR Gas MPG: 5 + 22.4%; Gas + Diesel 0 Demand: ‐ 17.5% Year 3
Feedstock = Renewable Biomass • “ Renewable biomass ” –– definition includes: – products from planted crops and crop residue • Corn, soybeans, canola, switchgrass – planted trees and tree residue • Slash, pre-commercial thinnings – animal waste material and byproducts • Tallow, chicken fat, manure – algae – biomass cleared from the vicinity of buildings and other areas to reduce the risk of wildfire – separated yard or food waste • Use cooking oil, trap grease, post-consumer food wastes – must come from land cleared or cultivated prior to 12/19/2007 • In 2012, ~40% of the US corn crop was used to produce ethanol • In 2012, ~21% of US soybean oil production was used to produce biodiesel 4
Renewable Fuel Production EPA ‐ Registered Renewable Fuel Production Facilities Sep ‐ 07 Jul ‐ 10 May ‐ 13 Plants Prod Cap. (BG) Plants Prod Cap. (BG) Plants Prod Cap. (BG) Ethanol 139 7.8 200 13 214 15.0 Sugarcane Eth 0 0 0 0 192 .660* BBD ‐ US 30 0.5 39 0.864 216 2.6 BBD ‐ Foreign 0 0 0 0 32 1.2 Renew. Dies. ‐ US 2 ~0 2 ~0 12 0.17 Renew. Dies. ‐ For. 0 0 0 0 3 0.5 Cellulosic 1 ~0 1 ~0 8 0.02 * Imports to the US in 2012 5
OPIS Average RIN Prices 2011 ‐ 2013 Average RIN Prices per gallon ‐ D4, D5, D6 RINs 2.0000 1.8000 1.6000 1.4000 1.2000 Price per Gallon 1.0000 0.8000 0.6000 0.4000 0.2000 0.0000 D4 2011 D4 2012 D4 2013 D5 2011 D5 2012 D5 2013 D6 2011 D6 2012 D6 2013 6
The life of a 2013 RIN RIN is RIN is received RIN is generated transferred by Blender blends Blender sells Obligated Party at Renewable separated RINs Fuel with a sale of Renewable Fuel renewable fuel + to uses RINs for Production Purchaser/ petro fuel to annual Facility Renewable Fuel Blender produce Obligated Party compliance a transportation fuel; RIN separation occurs OR 5/22/2013 6/22/2013 6/22/2013 7/1/2013 9/30/2013 2/28/2014 OR 2/28/2015 7
RFS2 Nested RVO Concept – using Cellulosic RINs (Circle size not proportionate) Total Renewable (RF) D3, D4, D5, D6, D7 Total Advanced Biofuels (AB) D3, D4, D5, D7 Cellulosic (CB) Biomass-Based Diesel (BBD) D7 D4 Cellulosic Biofuel Waiver Credit* : (CWC) * EPA Cellulosic Waiver Credits cannot be applied to AB or RF RVOs 8
Renewable Volume Obligations (RVOs) • RVO percentages are set by EPA each year by Nov 30 (in theory) • RVO % = EISA annual volume for a given D Code category Gasoline + Diesel projected to be used in coming year • Standards for 2013(prop) 2014 (est) – Cellulosic biofuel 0.008% 0.01% – Biomass ‐ based diesel 1.12% 1.50% – Advanced biofuel 1.60% 2.77% – Renewable fuel 9.63% 10.56% 9
RVO Costs 2012 2013 RINs at $2 ea RINs at $3 ea Average RIN cost/gallon $0.0167 $0.0900 $0.1920 $0.2889 gas or diesel Gas + Diesel Production 180 171.88 171.88 171.88 (BG) Cost ($B) 3.01 15.47 33.00 49.66 Assumes all RINs purchased as of 5/1 10
RINs Supply and Demand 2012-2014 (excl exports) 2013 2014 2012 2013 Est. 2014 Fuel 2012 20% of RINs Est. 2013 20% of RINs Production Est 2014 Est Cate ‐ Carry ‐ 2013 Needed Produc ‐ 2014 Needed and Carry ‐ Produc ‐ Carry ‐ over mandate For tion mandate For gory Imports over tion over 2013 2014 Corn Ethanol (D6) 12.98 B 2.028 B 2.67 B 11.8 B 13.0 B 1.2 B 2.88 B 13.0 B 13.2 B 0.2 B Non ‐ cellie ethanol, etc (D5) 606 M 154 M 166 M 672 M 650 M 0 M 270 M 1.77 B 700 M ‐ 1.07 B Bio ‐ diesel Renew. diesel 1.73 B 300 M 384 M 1.62 B 1.92 B 300 M 480 M 1.98 B 2.25 B 0.27M (D4) 11
Intended/Unintended Consequences • Blend Wall • More focus on advanced biofuels • More interest in “drop ‐ in” renewable fuels • Foreign involvement – producers and feedstock suppliers • Dependency on foreign renewable fuel producers – sugarcane ethanol • Increases in exports of gasoline, diesel • Employment in rural America • Need for many cellulosic production facilities in US 12
Outlook and Issues • New EPA Administrator • Blend Wall concerns • 2013 Standards • 2014 Standards • Quality Assurance Plans • New RIN trading platforms • New renewable fuel pathways and feedstocks • Need for cellulosic fuels 13
Q & A Thank you for the opportunity to speak with you today Sandra B. Dunphy Contact Information : Weaver & Tidwell, L.L.P. Phone: 832 ‐ 320 ‐ 3218 Cell: 281 ‐ 610 ‐ 4750 Fax: 713 ‐ 850 ‐ 1673 Email: Sandra.Dunphy@WeaverLLP.com Yahoo IM: RINderellatx Website/Free Blog: www.WeaverLLP.com 14
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