EPA Issues  Notice of Proposed
                Rulemaking to Establish a Voluntary
                Quality Assurance Program for
                Verifying the Validity of Renewable
                Identification Numbers Under the
                RFS Program
                  In today's action we are proposing to establish a voluntary quality
                  assurance program for verifying the validity of Renewable Identi-
                fication Numbers (RINs) under the Renewable Fuel Standard (RFS)
                program.

                For RINs that have been verified according to an approved quality
                assurance plan (QAP), the proposed program would provide an
                affirmative defense against liability for civil violations under certain
                conditions for the transfer or use of invalidly generated RINs, and
                would specify both the conditions under which invalid RINs must
                be replaced with valid RINs, and by whom. The proposed program
                includes elements to encourage verification of RINs to occur at the
                beginning of 2013.

                We are also proposing modifications to the exporter provisions of the
                RFS program to ensure that an appropriate number and type of RINs
                are retired whenever renewable fuel is exported. Finally, we are pro-
                posing a number of new regulatory provisions to address RINs that
                become invalid downstream of a renewable fuel producer.
SEPA
United States
Environmental Protection
Agency
Office of Transportation and Air Quality
              EPA-420-F-13-005
                 January 2013

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Background
The RFS program, which was established under Energy Policy Act of 2005 (EPAct) and subse-
quently modified through the Energy Independence and Security Act of 2007 (EISA), requires
that specified volumes of renewable fuel be used as transportation fuel, home heating oil, or
jet fuel each year. To accomplish this, EPA publishes applicable percentage standards annually
(for advanced biofuel, biomass-based diesel, cellulosic biofuel, and total renewable fuel) that
apply based on the sum of all gasoline and diesel produced or imported.  RINs are generated by
renewable fuel producers and importers and represent volumes that meet the requirements for
renewable fuel under the RFS program. Once RINs have been generated, they can be transferred
between parties and used by petroleum refiners and importers ("obligated parties") to show com-
pliance with their volume obligations. Cases of fraudulently generated RINs, however, have led
to a reduction in the overall liquidity in the RIN market and in smaller renewable fuel producers
having difficulty selling their RINs,
Summary of Major Provisions
Today's action proposes a voluntary third party quality assurance program that could be used to
verify that RINs have been validly generated. The proposal would provide a recognized means
for independent third parties to audit the production of renewable fuel and the generation of
RINs. The proposal contains the following elements:

      Minimum requirements for QAPs, including such things as verification of type of feed-
      stocks, verification that volumes produced are consistent with amount of feedstocks
      processed, and verification that RINs generated are appropriately categorized and match
      the volumes produced
      Qualifications for independent third-party auditors
      Requirements for audits of renewable fuel production facilities, including minimum
      frequency, site visits, review of records, and reporting
      Conditions  under which a regulated party would have an affirmative defense against
      liability for civil violations for transferring or using invalid RINs
      Identification of the party or parties who are responsible for replacing invalid RINs
      with valid RINs and the timing of such replacement
      Replacement instruments or other mechanisms that would provide assurance that
      invalid RINs are replaced with valid RINs

We are proposing two options  that would be available for the verification of RINs through a
QAP These options would provide flexibility in how parties choose to manage the risk and costs
of transferring or using invalid RINs. We are also proposing elements that could be applicable at
the beginning of 2013,

In addition, we are  proposing modifications to the exporter provisions of the RFS program.
These modifications would help to ensure that an appropriate number and type of RINs are
retired whenever renewable fuel is exported.

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Impacts
The voluntary quality assurance program is intended to improve RIN market liquidity and
efficiency and improve the ability of smaller renewable fuel producers to sell their RINs. As
the program is voluntary, there would be no required costs. Today's action would not affect the
volumes of renewable fuel required to be produced or the associated greenhouse gas or energy
security benefits of the RFS program.
For More Information
For more information, please visit the RFS website at:

          www.epa.gov/otaq/fuels/renewablefuels

To submit a question on the RFS program, and to view Frequently Asked Questions, please visit:

          www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/index.htm

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