The Environmental Protection Agency (EPA) has sent amendments to the Renewable Fuel Standard (RFS) to the White House’s Office of Management and Budget (OMB) that would further incorporate the use of biogas into the RFS. OMB review is the last step before finalizing an agency rule—it is reasonable to expect that EPA will publish a final rule in the next 30 to 60 days.
The RFS requires gasoline and diesel refiners, blenders and importers to purchase and use an ever-increasing number of renewable fuel credits (known as RINs) representing volumes of renewable fuel to offset the annual production of petroleum-based transportation fuel. While the EPA has long permitted RIN generation on biogas used as a transportation fuel, if EPA’s final rule adheres to the proposed rule, it could increase the number of RINs generated on biogas and potentially the value of those RINs.
Presently, the EPA allows the generation of Advanced Biofuel RINs on biogas produced at landfills, wastewater treatment plants and manure digesters used as a transportation fuel provided that the biogas is used as a gas rather than being converted to electricity and then used as a transportation fuel. Under the RFS, one RIN is generated for every 77,000 BTUs of biogas used as a transportation fuel. Advanced Biofuel RINs presently trade at $5 to $6 mmbtu of biogas used as a transportation fuel.
Under the EPA’s proposed version of this final rule, biogas from landfills would qualify as a Cellulosic Biofuel, which would generate a D3 RIN. This RIN price is hard to ascertain because currently there is little cellulosic production. Cellulosic RINs, however, meet three of the RFS tiered-mandates – Cellulosic, Advanced and Total Renewable Fuel. Biogas from waste treatment plants and waste digesters would continue to be classified as an Advanced Biofuel. The EPA also has proposed that the “producer” of renewable fuel, and the entity that generates the RINs, would be the company that compresses or liquefies the gas into compressed natural gas (CNG) or liquefied natural gas (LNG).
Additionally, the proposed rule would allow RIN generation on electricity from biogas, provided that electricity is used as a transportation fuel. A significant amount of the biogas collected at landfills, wastewater treatment plants and dairy farms is presently converted to electricity. Under the proposal, electricity from landfills will be eligible for RIN generation provided certain, very specific requirements are met by all parties involved in owning, operating and converting the biogas to electricity as well as those parties selling or distributing the electricity for use as a transportation fuel.
All of these changes have the potential to further incentivize the production and use of biogas. Furthermore, with electric and natural gas vehicles beginning to proliferate throughout the United States, the proposed expansion of the RFS biogas provisions may further incentivize the use and distribution of those vehicles and the fuel that powers them.