Managing Renewable Fuel in an Evolving Atmosphere

While the IRS Biodiesel Blender’s Tax Credit is a national issue, there are some issues that are more state specific.
Managing Renewable Fuel in an Evolving Atmosphere

Renewable fuel has become an integral part of the fuel marketing industry and in order to remain ultra-competitive, fuel wholesalers and retailers must be knowledgeable regarding both federal and state regulations, incentives, supply options and infrastructure. There are several key issues facing those in the fuel industry.

Current federal administration philosophies on deregulation have been taking their toll on the biofuels industry over the past two years. The U.S. Environmental Protection Agency’s Renewable Fuels Standard (RFS1- 2007, RFS2-2010-2022+) has effectively been the driving force behind the introduction of alternative fuels that can generate higher fuel margins. RFS corresponding renewable identification numbers still hold important value for blenders but other programs are beginning to overshadow the value of the renewable identification numbers (RINs). Blenders that recognize state incentives and growing interests in state low-carbon fuel standards (LCFS) will position themselves well for future fuel marketing models.

Delays in the reinstatement of the IRS Biodiesel Blender’s Tax Credit and ongoing mismanagement of EPA RFS Small Refinery Exemptions are strong indicators that federal policy makers and agencies are at odds with the will of the industry.

Blenders operating in states with additional incentives or that have nearby access to neat renewable fuel supply, which means they spend less on freight, are still managing to improve fuel margins through blending. For those that are farther away from a renewable fuel source, bulk rail purchases may control costs and still show advantages.

While the IRS Biodiesel Blender’s Tax Credit is a national issue, there are some issues that are more state specific.

California Low-Carbon Fuel Standard And Biodiesel Blending

Seeing California’s LCFS program taking the lead is no big surprise. Those blending in California and taking advantage of LCFS credits as well as RFS RIN credits are generating much higher fuel margins than those outside of California or those that are not blending in California. Under the LCFS, blenders can readily accept RIN credits while having their renewable fuel supplier manage the reporting requirements within the LCFS Reporting Tool (LRT).

California, however, has other road-blocks to blending biodiesel. Equipment compatibility requirements for any blends above 5 percent can dis- suade a marketer from jumping into blends as high as 20 percent. Recently, the California Air Resources Board (CARB) has issued guidance to the Certified Unified Program Agency (CUPA) to treat up-to B20 the same as B5. This is very good news for the individual travel center that cannot determine equipment-specific compatibility situations at their location.

Low-Carbon Standards Pushing Past The Borders Of The West Coast

State policy makers and agencies are faced with picking up the ball that is being dropped. State LCFS programs, modeled after the CARB LCFS program, have been adopted by Oregon and are currently being proposed in New York and Washington. NATSO’s Alternative Fuels Council is also reviewing progress being made on upcoming proposals for a Midwest LCFS-like approach that will provide blenders with more incentives to blend low carbon fuels.

Blending Incentives Do Exist and Deserve A Closer Look

Beyond active LCFS incentive programs, existing state incentives in Texas, Illinois, Iowa and New York, as well as mandates in Minnesota and Pennsylvania are keeping biofuel blending alive. A number of states,

such as Kansas, have incentive policies in place but are currently “unfunded” and languishing. Regardless of what state(s) operators are blending in, it is imperative to meet compliance requirements. Blenders are advised to review all possible incentives and to take advantage of what is available.

NATSO members can contact the Alternative Fuels Council staff for more information and are encouraged to use the tools and resources available on the Alternative Fuel Council’s website’s resources tab, including the blending calculator and a link to the DOE's Alternative Fuels Data Center that lists incentives by state.

Meet the Experts

For more than two decades Jeff Hove served the petroleum industry through state and federal legislative and rulemaking representation. Hove also worked with biodiesel and ethanol producers to educate producers and renewable fuel blenders on the equipment and fuel quality impacts of renewable fuels. Following the implementation of the Renewable Fuel Standard in 2007, Hove helped petroleum marketers and renewable fuel blenders realize greater profits by buying and trading RINs under the RFS.

Ginger Laidlaw joined NATSO to assist and navigate the complex compliance requirements of state and federal fuel regulations, including the RFS. Laidlaw has worked with renewable fuel marketers, blenders and producers for over eight years, and previously worked as an environmental consultant for several years

NATSO’s Alternative Fuels Council Supports and Provides Tools to Blenders

NATSO members can work with NATSO’s Alternative Fuels Council to reduce costs on RIN management, fuel tax remittance and tracking IRS BTC status. Whether your company is interested in ethanol, biodiesel, or any other fuel under the U.S. EPA's Renewable Fuel Standard (RFS), including bioheat, the Alternative Fuels Council can assist with decreasing compliance costs and increasing fuel margins.

Whether reporting requirements are tax related or alternative fuel standard related (RFS, LCFS), NATSO’s Alternative Fuels Council suggests employing a system of record that supports compliance reporting. Industry feedback has been positive as we on-board companies that have been historically blending and those that are new to the renewable fuels marketing model. Any blender can save money using the Alternative Fuels Council’s RIN management system. (NATSO membership provides a discount on the fees to work with the Alternative Fuels Council.)

The Alternative Fuels Council services include assistance with:

  • Compliance with state and federal renewable fuel regulations;
  • Finding supply/logistics solutions;
  • Fuel quality issues;
  • Renewable fuel infrastructure; and
  • RIN credit management, reporting and selling.

Whether operators are currently managing RIN credits, orchestrating supply channels, making decisions on infrastructure, or simply trying to enter the market of renewable fuels and RINs, Jeff Hove and Ginger Laidlaw are available to help. Contact Hove at (703) 739-8560 or and Laidlaw at (703) 739-8574 or to open the door to opportunities within the renewable fuel industry and maximize profits!

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