Due diligence and risk mitigation for the production of biodiesel, RNG, and other renewable fuels are often nuanced based on the project phase. Greenfield site analysis and selection falls heavily on the due diligence end of the scale, where facility expansions and process modifications are more compliance driven. Regardless of the type of project or your location, the goal is to identify and address compliance obligations as early as possible.
This guide provides an overview of regulatory considerations relevant to renewable fuel producers. The information provided will help guide conversations with your internal team and an engineering consultant. Key areas addressed include:
- Applicable federal or state laws and regulations
- Greenfield sites and the identification of potential project risks
- Regulatory compliance and program development for existing facilities
Regulatory Considerations for Renewable Fuel Producers
Numerous federal and state regulatory compliance programs exist to regulate emissions and mitigate risks associated with the production and transport of hazardous substances.
A Life Cycle Analysis (LCA) is used to determine the environmental impact of emissions produced across the entirety of renewable fuel production. Areas assessed include feedstocks, chemical processing and manufacturing, distribution, transportation, use, and disposal. The data collected helps guide producers in identifying sustainability goals and areas for improvement.
From a regulatory standpoint, LCA findings also support some of the data requirements for specific programs related to renewable fuel facility operations, project funding, and tax credits.
Environmental Protection Agency (EPA) Renewable Fuel Standard (RFS)
The EFA’s RFS program is prescriptive and definition-based, requiring that renewable fuel pathways be fully defined and approved before production. Included in this process is the characterization of feedstocks, process flow diagrams, energy balances, and product specifications. RINs will only be generated after pathway approval and are required to market and sell renewable fuel products.
Under current rules, participant categories for RINs under the RFS program include refineries and importers of gasoline or diesel, renewable fuel exporters, renewable fuel producers, and registered RIN market participants.
Low Carbon Fuel Standard (LCFS) Programs
LCFS programs exist to reduce carbon emissions during the transportation of fuels within a specified jurisdiction. The applicability of a program and any associated regulations varies by jurisdiction and should be assessed by an environmental engineering consultant. LCFS programs are typically retrospective, with compliance based on carbon intensity calculations and other post-production operational data such as feedstock origin, energy consumption, and modes of transportation.
Internal Revenue Service (IRS) Renewable Fuel Tax Credit Programs
Federal renewable fuel tax credit programs through the IRS are also retrospective. Program eligibility is typically determined by production and operational performance. Third-party verification is optional but recommended due to potential safe harbor protections. Often, these credits are an afterthought but should be evaluated during the early process design phase. Proactive evaluation and diligent recordkeeping will prove beneficial in maximizing credit eligibility.
National Environmental Policy Act (NEPA) Compliance
Projects involving federal grants or funding must comply with NEPA regulations as required by law. Pre-environmental assessments should be conducted during pre-engineering to identify and outline all applicable state and federal permits, along with any potential project risks. The review process includes Phase I and II Environmental Assessments followed by in-field reviews. Data and findings are packaged with the NEPA report for submission.
Project-Specific Approaches to Due Diligence and Risk Mitigation
While most regulatory programs apply to both new construction and facility modifications, there are additional considerations specific to your project type.
Environmental Due Diligence During Site Selection
Numerous regulations apply to environmental permitting for greenfield sites, requiring thorough Phase I and II Environmental Site Assessments (ESA) under the direction of an environmental engineer. Focus areas typically include water scarcity, wastewater disposal, historical land use, and threatened/endangered species (T&E). These assessments, along with a carbon intensity review, allow the identification of permitting paths and “fatal flaws” affecting the viability of the project.
If no fatal flaws are identified, your environmental engineering consultant will develop a permitting matrix. The detailed schedule outlines project milestones, the required permits, and the timing of submission to keep the project schedule on track.
Regulatory Compliance During Facility Modifications
Renewable fuel processing facility expansion projects and modifications to chemical processes trigger re-permitting and an environmental review by state or local agencies. Compliance at this stage is highly dependent on air quality permitting and water/wastewater permitting, both of which are often lengthy and involved processes.
It might be tempting to proceed with an expansion or process modification project before conducting environmental assessments and securing the appropriate permitting. In addition to the risk and penalties associated with being caught by a regulatory agency, producers lose valuable time and money working through the action items required to bring the facility into compliance.
Process safety is a final component of operational compliance and risk mitigation in the production of hazardous substances. New construction, facility expansion, and process modification projects all require a Process Hazard Analysis (PHA) to define industrial equipment and processes and evaluate potential hazards. It is critical to conduct this analysis early in the design stage to guide the development of a Process Safety Management (PSM) plan in compliance with OSHA standards.
Keep Your Renewable Fuel Facility in Compliance
Remaining in regulatory compliance involves a long-term strategy. Permitting requirements vary by locality, and even federal requirements change from year to year. Permit expirations and submission deadlines vary widely, making it difficult to keep track of environmental reporting. Establishing a compliance reporting schedule is the best way to manage the creation and timely submission of permits and reports.
Effective environmental due diligence and risk mitigation require taking a proactive approach to project management. Enlisting the help of an engineering consultant knowledgeable in renewable fuels and regulatory compliance will provide your team the support it needs through each project phase.
Pinnacle Engineering works closely with renewable fuel producers to provide support with permitting, regulatory representation, and compliance program development. Request a consultation to discuss your project with our engineers.