Renewable Fuels Regulation - Industry Technical Advisory Group on the Federal Renewable Fuels Regulations

This document presents proposed approaches to address a number of the issues which have been raised by the Industry Technical Advisory Group on the Federal Renewable Fuels Regulations. The numbering of the issues in this document aligns with those set out in the Working Document for Consultation (Renewable Fuels Regulations) Discussion of Issues (June 10 and 11, 2009) sent to Advisory Group members by email on June 12, 2009.

1. Concern that black liquor might qualify as renewable fuel.

2. Concern that biodiesel might not meet the definition of renewable fuel.

3. Question as to whether fuel made for municipal solid waste falls under the definition [of renewable fuel].

8. Suggestion that level of denaturant should be consistent with federal tax Act.

29. Concern that B99-level blends do not meet the definition of renewable fuel. This may be a common product imported from the U.S. (given U.S. incentives).

"renewable fuel" means a liquid fuel that is produced solely from one or more renewable fuel feedstock types, and includes

• (a) any denaturant in the fuel; and
• (b) any additive which accounts for less than 1% of the volume of the fuel.

"renewable fuel" means a liquid fuel, excluding black liquor, that is

• (a) produced from one or more renewable fuel feedstock types, but may contain
  • (i) denaturant, provided the fuel is ethanol, and
  • (ii) substances, including additives, that are not produced from a renewable fuel feedstock type and that combined account for less than 1.5% of the volume of the fuel; or
• (b) biodiesel.

[Explicitly excludes black liquor and includes biodiesel; also provides for additives and contaminants and encompasses B99-level fuel]

"biodiesel" means a liquid fuel that is

• • (i) a mono-alkyl ester,
  • (ii) suitable for use in diesel engines,
  • (iii) produced from one or more renewable fuel feedstock types,
  • (iv) includes any alcohols contained in the fuel, provided they account for less than 10% of the mass of the fuel, and
  • (v) substances, including additives, that are not produced from a renewable fuel feedstock type and that combined account for less than 1.5% of the volume of the fuel.

"black liquor" means a by-product of the Kraft cooking process that transforms wood into pulp, which is then dried to make paper, and contains wood lignin, hemicellulose from wood, and chemicals used in the process.

"denaturant" means a mixture of hydrocarbons that

• (a) has an end boiling point less than 225°C;
• (b) is added to ethanola renewable fuel to make it unsuitable for use as a beverage but not unsuitable for use in automotive or diesel engines; and
• (c) does not in volume exceed 5%is less than 0.19% and not greater than 4.76% of the total volume of the ethanola renewable fuel when combined with the mixture of hydrocarbons.

"renewable fuel feedstock type" means …

• • (xiv) animal or municipal solid waste materials, or
  • (xv) municipal solid waste materials.

"municipal solid waste materials" means …

• Awaiting CRFA to make a proposal, if any, for EC's consideration.

19. (7) A person creating a compliance unit based on a volume of renewable fuel shall maintain a record demonstrating that the renewable fuel meets the definition of renewable fuel in subsection 1(1), including the maximum percentage of additives, alcohols, or substances that are not produced from a renewable fuel feedstock type.

7. Question as to how kerosene [jet fuel] volumes blended into diesel fuel downstream of refineries are accounted for.

21. Question as to how volumes of renewable fuel ultimately used for non-fuel purposes are handled. [Concern that the pools include substances that may not be used as fuels.]

24. Concern that the definition of "unfinished gasoline" is too broad.

27. Question as to how a batch is treated where part of the dispatched batch is for use in the excluded zone, with the rest being delivered elsewhere in Canada.

33. Concern that the wording regarding exports in subsection 9(3) is inconsistent with other regulations (re: "sold or delivered for")

9. (1) Subject to subsection (3), a primary supplier may, before dispatching a batch of gasoline, diesel fuel or heating distillate oil from a production facility that it owns, or importing a batch of gasoline, diesel fuel or heating distillate oil, identify and record the batch of fuel, as appropriate to the type of fuel, as

• (a) pool gasoline or pool distillate;
• (b) gasoline, diesel fuel or heating distillate oil for use in aircraft;
• …
• (f) gasoline, diesel fuel or heating distillate oil for export;
• …
• (h) gasoline, diesel fuel or heating distillate oil for use as a feedstock at a chemical production facility;
• (i) gasoline, diesel fuel or heating distillate oil where part of the batch is for use in Zone TNL and the rest for use elsewhere in Canada; or
• (j) diesel fuel or heating distillate oil for use in aircraft where part of the batch may be for use as a blending component for diesel fuel or heating distillate oil.

4. (12) Where a primary supplier has identified a batch under paragraph 9(1)(i), the primary supplier shall include the volume of the batch in its gasoline or distillate pool, as the case may be, but, provided that the primary supplier has a record that establishes that a portion of the batch was sold or delivered for use in the applicable area, the primary supplier may subtract from its gasoline or distillate pool, as the case may be,

• (a) the volume of the portion of that batch of gasoline that was sold or delivered for use in Newfoundland and Labrador; and
• (b) the volume of the portion of the batch of gasoline, diesel fuel or heating distillate oil that was sold or delivered for use in Zone TNL other than Newfoundland and Labrador.

4. (13) Where a primary supplier has identified a batch under paragraph 9(1)(j), the primary supplier shall include the volume of the batch in its distillate pool, but may subtract the volume of the portion of that batch that was sold or delivered for use in aircraft, provided that the primary supplier has a record that establishes that the portion of the batch was sold or delivered for use in aircraft.

13. (2)(d)(iii) a description of the primary use of the products resulting from blending at the facility,

• …
• (e)(iii) a description of the primary use of the products produced at the facility,
• …
• (f)(v) a description of the primary use of the products imported by the person,

9. (3) Every primary supplier shall maintain a record that establishes that each batch that it identified under any of paragraphs (1)(b) to (g) (j) was sold or delivered for the use appropriate to the identified type.

NOTE: Sulphur in Gasoline, subsection 5(3): "Every primary supplier shall maintain a record that establishes (a) that each batch it identified under any of the paragraphs (1)(b) to (f) was sold or delivered for the use appropriate to the identified type; and (b) …"
Where paragraph 5(1)(e) is: "gasoline for export;"

No differences noted.

11. Concern that compliance units should be validated before trading is allowed.

In order to provide the regulatee with more time for validation of compliance units it may wish to acquire from other parties, the date for the end of the "trading period" and the submission of reports has been changed from February 15 to March 31 in subsections 8(1), 20(1), 21(2) and 22(6).

"trading period" means, in respect of a gasoline or distillate compliance period, the period from the start of thea gasoline compliance period or distillate compliance period, as the case may be, to February 15March 31 of the year after the period ends.

8. (1) For each gasoline compliance period or distillate compliance period a primary supplier produces or imports gasoline, diesel fuel or heating distillate oil, the primary supplier shall submit to the Minister a report on or before February 15March 31 of the following year.

20. (1) For each gasoline compliance period and distillate compliance period in which a trading system participant created or in respect of which they exchanged a compliance unit created during that compliance period, the trading system participant shall submit to the Minister a report on or before February 15March 31 of the following year.

21. (2) For each gasoline compliance period or distillate compliance period in which a record is made under subsection (1), the person required to make a record under subsection (1) shall submit a report to the Minister on or before February 15March 31 of the following year.

22. (6) For each gasoline compliance period or distillate compliance period in which a person produced or imported renewable fuel, the person shall submit a report to the Minister on or before February 15March 31 of the following year.

As a corollary change to provide the auditor time after the new reporting date, the date for the submission of the auditor's report has been changed from May 31 to June 30 in paragraph 23(1)(b).

23. (1) A trading system participant and any person who produces or imports renewable fuel shall …

• (b) not later than May 31June 30 of the year following the gasoline compliance period or distillate compliance period in respect of which the audit was carried out, submit to the Minister a report, signed by the auditor, that contains …

13. Suggestion that there should be provisions to restrict the risk of speculating (e.g., a person that imports one batch of fuel could acquire any number of compliance units).

15. (4) The maximum number of compliance units that a primary supplier can own at the end of each month shall not exceed the total compliance period-to-date volume of gasoline, diesel fuel and heating distillate oil produced and imported by the primary supplier, as recorded under section 10, multiplied by 6 compliance units per litre.

• The factor of "6" comes from a producer or importer of only E85 gasoline. For every 100 litres of E85, the primary supplier has 15 litres of gasoline in its pool (after subtracting the renewable content) and has created 85 gasoline compliance units. This leads to a ratio of 85:15 or almost 6:1.

19. (8) At the end of each month during a compliance period, a primary supplier shall record

• (a) the total volume of gasoline, diesel fuel and heating distillate oil it produced or imported since the beginning of the compliance period; and
• (b) the result of the calculation of the number of compliance units it owns at the end of the month divided by the volume recorded in paragraph (a).

20. (2)(l) for each month of the compliance period, the total volumes and the result of the calculation, as recorded under subsection 19(8).

16. Concern that the timeline for the creation of distillate compliance units is unclear. [Suggestion that all distillate compliance units created in first gasoline compliance period be allowed to be used during first distillate compliance period.]

17. Concern that the carry-over (re-creation) provisions are unclear [as written, subsection 14(12) would not allow the re-creation of distillate compliance units at the beginning].

14. (12) The maximum number of distillate compliance units that may be created under subsection (11) is equal to,

• (a) for a primary supplier,
  • (i) after subsection 3(2) comes into force, 0.2 compliance unit per litre multiplied by20% of the quantity, in litres, of renewable fuel in the primary supplier's distillate pool required pursuant to subsection 3(2) for the distillate compliance period referred to in subsection (11), and
  • (ii) until subsection 3(2) comes into force but ending on April 1, 2012, 1 compliance unit per litre multiplied by the quantity, in litres, of renewable fuel in the primary supplier's distillate pool produced or imported during the distillate compliance period referred to in subsection (11); and
• (b) for a trading system participant other than a primary supplier, the number of distillate compliance units that it owns at the end of the trading period less the number of distillate compliance units that it created under subsection (11) during the compliance period.

14. (10) The maximum number of gasoline compliance units … is equal to (a) for a primary supplier, 0.2 compliance unit per litre multiplied by20% of the quantity, in litres, of renewable fuel …

18. Suggestion that there should be refinery-specific ratios for the number of gasoline vs. distillate compliance units created from use of bio-crude.

19. Suggestion that there should be bio-crude-specific factors for the number of compliance units created per unit of bio-crude feedstock (based on the ratio of bio-crude energy content to petroleum crude energy content).

14. (5) A trading system participant who solely or jointly uses bio-crude as a feedstock to produce a liquid fuel in Canada may create 36 distillate and 72 gasoline compliance units for each 10 litres of bio-crude used as feedstock, as recorded under paragraph 19(2)(b).

4. (4) Provided subsections (8) or (9) or paragraph (10)(b) do not apply, in calculating its gasoline pool, a primary supplier may either: …

• (b) in the case of producing fuel from bio-crude, subtract from the pool a volume equal to 7020 percent of the volume of bio-crude that it used as feedstock during the gasoline compliance period, as recorded pursuant to section 19.

4. (5) Provided subsections (8) or (9) or paragraph (10)(b) do not apply, in calculating its distillate pool, a primary supplier may either: …

• (b) in the case of producing fuel from bio-crude, subtract from the pool a volume equal to 3060 percent of the volume of bio-crude that it used as feedstock during the distillate compliance period, as recorded pursuant to section 19.

6. (4) For the purposes of these Regulations, all volumes of bio-crude used as feedstock shall be measured on a dry basis.

• Additional issue to beaddressed: how is this measurement to be done?

Clarification to definition of "bio-crude" to differentiate a co-processing (bio-crude) facility from a bio-refinery, plus to correct typos and add clarification:

"bio-crude" means a liquid feedstock derived from a renewable fuel feedstock type that is used as feedstock, along with petroleum-derived feedstocks, in a refinery in Canada in the production of gasoline, diesel fuel, heating distillate oil or other liquid petroleum fuels.

26. Concern that Zone TNL is not defined by latitude, similar to Sulphur in Diesel Fuel Regulations.

"Zone TNL" means that part of Canada comprised of Newfoundland and Labrador, Yukon, Northwest Territories and Nunavutthe area corresponding to the following geographical areas:

• (a) Yukon, Northwest Territories and Nunavut;
• (b) Newfoundland and Labrador; and
• (c) that part of Quebec that is north of latitude 60°N.

9. Suggestion that compliance units should be created from use of B100 [FAME].

34. Concern that provisions do not provide for the creation of compliance units for renewable fuel produced at a bio-refinery.

"neat fuel consumer" means

• (a) where a prescribed neat fuel is dispensed from a facility operated by the owner of a fleet of vehicles into the fleet vehicles, the owner of the fleet of vehicles;
• (b) where a prescribed neat fuel is dispensed from a retail or card-lock facility into an engine, boiler, furnace or process unit that produces heat or energy, the owner of the facility;
• (c) in any other case where a person uses a prescribed neat fuel for combustion in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, the person.

"prescribed neat fuel" means a renewable fuel that is

• (a) biodiesel; or
• (b) a liquid fuel that is
  • (i) produced at a facility that uses feedstocks derived from renewable fuel feedstock types and does not use any petroleum-derived feedstocks,
  • (ii) suitable for use in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, and
  • (iii) chemically indistinguishable from gasoline, diesel fuel, heating distillate oil, or other liquid petroleum fuel suitable to be used in the applicable type of combustion unit listed in subparagraph (ii).

14. (5.1) A trading system participant who solely or jointly owns a batch of prescribed neat fuel and sells it or delivers it for sale to a neat fuel consumer, or who combusts it themselves, may create

• (a) a single distillate compliance unit for each litre of the prescribed neat fuel as recorded under subsection 19(9), where the trading system participant has written evidence establishing that the batch was either:
  • (i) sold or delivered for sale in Canada for combustion in a diesel engine or domestic-type burner, as recorded under subsection 19(9), or
  • (ii) combusted by the trading system participant in a diesel engine or domestic-type burner, as recorded under paragraph 19(9); or
• (b) a single gasoline compliance unit for each litre of the prescribed neat fuel, as recorded under subsection 19(9), where the trading system participant has written evidence establishing that the batch was either:
  • (i) sold or delivered for sale in Canada for combustion in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, other than a diesel engine or domestic-type burner, or
  • (ii) combusted by the trading system participant in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, other than a diesel engine or domestic-type burner.

19. (9) A trading system participant who creates a compliance unit pursuant to subsection 14(5.1) shall make a record that establishes that the batch of prescribed neat fuel was either

• (a) sold or delivered for sale in Canada for combustion in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy; or
• (b) combusted in Canada by the trading system participant in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy.

19. (10) The record made under subsection (9) shall include:

• (a) the civic address and name, where applicable, of the facility where the fuel was sold or delivered for sale or dispensed for combustion;
• (b) the type and volume of the prescribed neat fuel that was sold or delivered for sale;
• (c) the date that the batch was sold or delivered for sale or combusted;
• (d) the name and registration number, if any, of the person from whom they acquired the prescribed neat fuel, if any, and the person who originally produced the prescribed neat fuel, if known;
• (e) the renewable fuel feedstock type used to produce the prescribed neat fuel, if known;
• (f) written evidence establishing that the batch was
  • (i) sold or delivered for sale in Canada for combustion in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, or
  • (ii) combusted in Canada by the trading system participant in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy;
• (g) the type of combustion unit in which the prescribed neat fuel was combusted, with the types being a diesel engine, a domestic-type burner, a spark-ignition engine, a boiler, a furnace, or another type of combustion unit.

14. (6) A compliance unit shall only be created under subsections (1) to (5.1) on or after September 1, 2010, and at the time when,

• (a) for subsections (2) and (4), the batch is imported;
• (b) for subsections (1) and (3), blending occurs; or
• (c) for subsection (5), the record under subsection 19(2) is made regarding the use of bio-crude as feedstock; or
• (d) for subsection (5.1), the record under subsection 19(9) is made establishing that the prescribed neat fuel was
  • (i) sold or delivered for sale in Canada for combustion in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, or
  • (ii) combusted in Canada by the trading system participant in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy.

14. (8) If more than one person either owns or imports the batch of fuel referred to in subsections (1) to (4) or (5.1) … compliance units may only be created

• (a) where all the persons owning the batch … have a written agreement that
  • (i) only one of them will create compliance units in respect of the batch that is imported, the blending with renewable fuel, the selling or delivery for use or combustion of a prescribed neat fuel, or the use of bio-crude, as the case may be, …

13. (1) A person, other than a primary supplier, who …

(iv) is a neat fuel consumer,
may elect to participate in the trading system …

13.(2)(f.1) for each facility to which fuel described under subparagraph (1)(iv) is sold or delivered for sale, and for each type of such fuel,

• • (i) the civic address and name, if any, of the facility,
  • (ii) the volume, if known, of the prescribed neat fuel, during the year preceding the year of this report,
    • (A) sold or delivered for sale in Canada for combustion in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, or
    • (B) combusted in Canada by the trading system participant in an engine, boiler, furnace, or another type of combustion unit that produces heat or energy, and
  • (iii) the type of combustion unit in which the prescribed neat fuel was combusted, with the types being a diesel engine, a domestic-type burner, a spark-ignition engine, a boiler, a furnace, or another type of combustion unit, if known, during the year preceding the year of this report;

18. (2) In the compliance unit account book, the trading system participant shall record…

• (a.1) by facility, for each facility in Canada at which the trading system participant combusted or sold or delivered for sale prescribed neat fuel for combustion and created a compliance unit in respect of that activity pursuant to subsection 14(5.1);

20. (2) A report submitted under subsection (1) shall contain …

• (c.1) for each facility in Canada at which the trading system participant combusted or sold or delivered for sale a prescribed neat fuel for combustion and created a compliance unit in respect of that activity,
• (i) the separate quantities of gasoline and distillate compliance units created pursuant to subsection 14(5.1);
• (ii) the total volume of prescribed neat fuel combusted or sold or delivered for use, by type of prescribed neat fuel;