The U.S. Environmental Protection Agency’s (EPA) Quality Assurance Plan (QAP) is currently a voluntary program for most regulated parties where independent third parties verify the validity of RINs by auditing the production of renewable fuel and the generation of Renewable Identification Numbers (RINs) on a quarterly basis.
This QAP provides an affirmative defense for the transfer or use of invalid RINs that had been verified under an approved QAP, while also defining the conditions when RINs must be replaced and a process for who will replace the RINs.
Christianson remains one of only three approved domestic QAP providers and our team has been following the latest potential changes to the RFS program as well as new and evolving areas, which includes regulatory decisions and quality assurance protocols. Here are the key points of interest:
Waste Feedstock Documentation:
Our team anticipates a decision regarding acceptable waste feedstock documentation soon. Until such a determination is made, pathways involving waste feedstocks remain on hold for renewable fuel producers who do not have custody of all documentation to the point of origin of its feedstock. Christianson has developed audit procedures for waste feedstock documentation options including summary spreadsheets being used as records to point of origin, and the use of encrypted software being used as recordkeeping. We have received verbal approval of our audit techniques for the previously noted forms of recordkeeping, pending EPA’s assessment of whether these forms of recordkeeping satisfy the requirements in the Renewable Fuels Standard.
In-Situ Cellulosic Ethanol Pathways:
The EPA has launched the approval process for in-situ cellulosic ethanol pathways from corn. This development introduces various considerations as ethanol plants prepare to generate D3 cellulosic ethanol RINs. We are closely monitoring the implications of this development and its potential impact on industry practices.
While the QAP program remains voluntary, market trends suggest a growing preference for Quality RINs (QRINs) on D3 ethanol RINs. Ethanol producers are advised to prepare now for the implementation of QAP procedures once pathways are approved. Christianson has submitted QAP protocols to the EPA for consideration and will commence procedures promptly upon approval. We are expecting to begin QAP onboarding of ethanol plants producing cellulosic ethanol in Q3 2024.
D3 Cellulosic Ethanol RINs Affect Efficient Producer Pathway (EPP) Approvals:
Ethanol plants utilizing the Efficient Producer Pathway (EPP) must obtain new approvals to continue utilizing its EPP in conjunction with a D3 ethanol pathway. Current approvals do not encompass cellulosic feedstocks in the conditions of use, necessitating re-approval for the incorporation of cellulosic ethanol conversion. On a standard basis, an EPP petition should receive approval from EPA within 30 days of submission. With the large, expected influx of applications in connection with the D3 pathways, this completion may be further delayed. Before beginning RIN generation for D3 ethanol RINs, please ensure that your existing starch pathways have not been compromised or have been properly reapproved so that your starch gallons are not at risk.
D3 Ethanol Production and Storage Prior to Pathway Approval (Lookback Provision):
Testing and accumulation of cellulosic gallons produced prior to pathway approval occurs for every ethanol production facility, leaving many facilities wondering where D3 RIN generation can begin. The EPA added section 80.1458 to the RFS regulations in September 2023, which addresses allowed storage of renewable fuel prior to pathway approval. Section 1458 first specifies that in order to store renewable fuel for later RIN generation, that the producer must have completed the independent third-party engineer review. For cellulosic ethanol, this includes an engineer site visit at both the production facility and the lab where the cellulosic testing occurs. RIN generation/accumulation may begin on the date that both site visits have been completed as long as no changes are made to the facility after the site visit date and subject to additional provisions below.
Section 1458 goes on to specify that the fuel must be stored on the same site as it was produced. The cellulosic ethanol producer must be able to prove that there was consistent inventory held to cover the cellulosic gallons accumulated at any point in time. The stored inventory calculations may include gallons back through fermentation as long as the producer can prove the ethanol concentration in those gallons and temperature correction to 60 degrees F is completed.
One final consideration on the lookback provision is if and how various programs are connected. California has approved methodologies for fiber ethanol gallons in its LCFS program. The EPA definition of cellulosic gallons is a subset of the whole fiber gallon that California methodology covers. Therefore, plants that have sold all fiber gallon inventory into the California market as Fiber ethanol gallons, may have already sold their cellulosic gallons under EPA and may not have a lookback opportunity. In discussion with EPA employees last week, Christianson noted differing opinions on whether the low carbon programs should be taken into consideration for the EPA program lookback. This issue is currently being sent to EPA Enforcement for a final opinion. We will provide critical updates as we hear final outcomes from EPA for plants participating in multiple programs. This is an issue for the start of D3 generation, but should not affect producers on an ongoing basis once RIN generation has started.
These updates represent significant developments within the renewable fuel production sector, reflecting ongoing efforts towards regulatory compliance and industry advancement. We remain committed to keeping you informed of relevant developments and ensuring your continued success in renewable fuel production.
Thank you for your attention to these important matters. There are a number of other nuances to be considered that are not mentioned here. Our team will send updates as decisions and additional information becomes available, but please reach out to our experts with additional questions that you may have.
