Federal Renewable Fuels Regulation - Overview of Approach

May 22, 2009

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• The 2006 Notice of Intent set out that we would look closely at the Renewable Fuel Standard developed by the U.S. EPA
• The approach generally harmonizes with that of the U.S. rule
  • The renewable fuel requirement applies to the volume of petroleum fuel produced and imported
  • Tradeable compliance units are the basis for complying with the regulations
    • Each compliance unit represents one litre of renewable fuel

• The key simplification is that producers and importers of renewable fuel are not involved in creating compliance units
  • This avoids the need for complex provisions regarding "RINs"
    • Creation of 38-digit RINs, assignment to batches of renewable fuel, separation upon blending, etc
    • EPA indicates that the RIN approach has been problematic
  • The change means record-keeping provisions can be used instead of RINs to substantiate compliance units

The Canadian approach relies heavily upon recordkeeping and reporting requirements to establish compliance

• This is to be implemented by 2011 or earlier, subject to technical feasibility
  • Questions remain from industry and end-users relating to cold weather operation, long-term storage, impacts on engines and equipment, distribution infrastructure
  • Work has commenced to address the issues
    • NRCan has launched a demonstration initiative building on the Alberta Renewable Diesel Demonstration
• The working document for consultation is an integrated package with a "place holder" for the distillate requirement
  • It sets out the full approach

• The regulation will require renewable fuel volumes of at least:
  • 5% of a primary supplier's gasoline pool (its annual production/importation of gasoline - both finished fuel and sub-octane blendstock)
  • 2% of a primary supplier's distillate pool (its annual production / importation of diesel fuel and heating oil)
• Compliance is based on ownership of compliance units at the end of the year
  • 1 distillate compliance unit = 1 litre of renewable fuel in diesel or heating oil
  • 1 gasoline compliance unit = 1 litre of renewable fuel in gasoline or other fuels
  • Compliance units may be transferred between primary suppliers

The pool is defined at a primary supplier's refinery gate and import points

Limits apply on a company (not facility) basis

• Through the same type of actions:
  • Blending renewable fuel with petroleum fuel
  • Importing blended fuel other than gasoline, diesel fuel or heating oil
    • (note that importers of gasoline / distillate are primary suppliers)
  • Producing fuel other than gasoline, diesel fuel or heating oil using bio-crude feedstock
    • (note that persons producing gasoline / distillate from bio-crude are primary suppliers)

Persons creating compliance units must notify the Minister that they elect to participate in the trading system and provide registration information

The restrictions on trading are intended to ensure that compliance units reach obligated parties

• Enforcement rests solely upon records and reports
• Requirements apply to primary suppliers, trading system participants, and producers and importers of renewable fuel
• Information is required on:
  • Fuel type
  • Volume produced / imported / exported
  • Renewable fuel content
  • Renewable fuel volume produced, imported, acquired, sold, blended
  • Compliance units created, transferred, received
  • Year-to-date balance of compliance units
• A third part audit of records and reports is required annually

• Method for measuring volumes
• Election to participate in trading system
• Ownership and cancellation of compliance units
• One-time registration report for regulatees
• Third-party audits
• Retention of records

• Part 1 - Requirements Pertaining to Gasoline, Diesel Fuel and Heating Distillate Oil
  1. Interpretation
  2. Application
  3. Prescribed Quantities
  4. Calculation of Pools
  5. Quantity of Renewable Fuel
  6. Method for Measuring Volumes of Fuels
  7. Registration as a Primary Supplier
  8. Compliance Period Report by Primary Suppliers
  9. Record of Type of Fuel
  10. General Records by Primary Suppliers
  11. Retention of Records
  12. Submission of Samples, Records and Reports
• Part 2 - Requirements Pertaining to a System of Tradeable Compliance Units
  13. Election to Participate in a Trading System for Compliance Units
  14. Creation of Compliance Units
  15. Ownership of Compliance Units
  16. Exchange of Compliance Units
  17. Use and Cancellation of Compliance Units
  18. Compliance Unit Account Book
  19. Additional Records for Trading System Participants
  20. Compliance Period Report for Trading System Participants
  21. Records and Reporting on Sales of Fuel for Export
  22. Records and Reporting on Renewable Fuel
  23. Auditor's Report
  24. Coming Into Force