Revised questions and answers on the Federal Renewable Fuels Regulations: provisions


Section 1 - Interpretation

B.1: Why do some of the definitions in the Renewable Fuels Regulations differ from the definitions of the same terms in other federal fuel regulations?

Definitions in the Renewable Fuels Regulations were initially developed from the definitions in other federal fuel regulations. Differences were introduced only where warranted by the differing circumstances of the Renewable Fuels Regulations.

B.2: Who is a primary supplier?

Primary supplier is a term that has been used in other federal fuel regulations. For the purposes of the Renewable Fuels Regulations, a primary supplier is a producer or importer of gasoline, diesel fuel or heating distillate oil. It is the primary supplier who must meet the renewable fuel volume requirements for its gasoline, diesel fuel or heating distillate oil.

B.3: What is the difference between a production facility and a blending facility?

A production facility is a petroleum refinery or another facility at which the production of gasoline, diesel fuel or heating distillate oil occurs. A blending facility is a facility where liquid petroleum fuel is blended with renewable fuel and may include a fleet of mobile facilities, such as cargo tankers, railway cars, boats and marine vessels. Facilities must be located in Canada.

A blending facility is not a production facility, unless the blending facility is on or adjacent to a petroleum refinery. This exception is to allow such integrated facilities to operate as one, and thus reduce the reporting and administrative burden on the primary supplier.

B.4: Why do blending facilities include fleets of mobile facilities in which blending occurs?

The blending of renewable fuels with petroleum fuels can, and does, occur in railway cars, trucks, boats and other mobile "facilities" of this nature. Where blending occurs in these types of facilities, the regulations require records to be made and reports to be submitted for the fleet of such mobile facilities, rather than for each individual truck, rail car and boat.

B.5: Does a production facility include mining operations that occur on my property?

A production facility generally includes only the facility that actually produces gasoline, diesel fuel or heating distillate oil. This includes a bitumen upgrader if the facility produces any of those fuels.

At a bitumen upgrader (or a refinery) that is associated with a mining operation and that produces any of those fuels, the volume of the fuel that is dispatched from the production facility or dispensed into the fuel tanks of vehicles or other mobile equipment within the facility must be included in the facility's pool.

B.6: Who is a participant in the trading system?

A participant in the trading system is defined in section 10 of the regulations. It is a person who is either a primary supplier or a person who has elected to participate in the trading system as an "elective participant." Participants are the only person who can create or trade compliance units.

B.7: The notion of a "batch" is problematic because the number of batches to be produced according to the definition in the regulations could be significant. Is it possible that every single truck may become a batch?

The notion of batch has been defined in other federal fuel regulations (e.g., the Benzene in Gasoline Regulations and the Sulphur in Gasoline Regulations). While the approach to defining "batch" in the Renewable Fuels Regulationsis consistent with other federal fuels regulations, it does differ according to the circumstances of these regulations.

A batch is "an identifiable quantity of liquid fuel, with a single set of physical and chemical characteristics." Depending on the individual circumstances surrounding the production of the batch, it may be as small as a single compartment tank within a tanker truck or as large as a pipeline shipment.

B.8: Why are the first gasoline and distillate compliance periods longer than a year?

The longer first compliance periods will provide some flexibility to address potential start-up issues, since a regulatee has some additional time to make up renewable fuel volume deficiencies that they might have had during the earlier part of the compliance period.

In 2006, the Government announced that the renewable fuel requirements would be on an annual average basis commencing in 2010. In developing the regulations, it was decided that the initial compliance period should not be less than 12 months to aid in a smooth implementation of the requirements. The proposed regulations published in Part I of the Canada Gazette had a 16-month initial gasoline compliance period that commenced September 1, 2010. In finalizing the regulations, Environment Canada decided that the first gasoline compliance period would not be shorter than the originally proposed 16 months - with a December 15, 2010 start date, this meant it would end after April 15, 2012. In the final regulations, the first compliance period ends December 31, 2012 to ensure that the subsequent compliance periods will be calendar years and so aligning with requirements under existing federal fuel regulations.

The first distillate compliance period is defined as ending December 31st of the year after the 2% distillate requirement takes effect. This will result in an initial period between 12 and 24 months in duration.

B.9: How is "fuel" defined? Why isn't it defined in the Regulations?

The term "fuel" is defined in the Canadian Environmental Protection Act, 1999, under which authorities the Renewable Fuels Regulations are enacted. The definition of "fuel" under section 3 of the Act is as follows:

"fuel" means any form of matter that is combusted or oxidized for the generation of energy.

If a substance does not meet this definition, it is not a fuel under the Act, and consequently it is not a fuel under the Renewable Fuels Regulations.

B.10: Why do gasoline, diesel fuel and heating distillate oil have two-part definitions, with the first part being whether the fuel is sold or represented as being suitable for a particular combustion device and the second part being a list of physical characteristics?

The identification of whether a fuel is gasoline, diesel fuel or heating distillate oil will generally rely on how the fuel is being sold or represented. However, in the case of a dispute, the fuel will be defined by its physical characteristics. This two-part approach eliminates the need to require primary suppliers to test their fuels continuously and retain samples of it and reduces the need for Environment Canada's enforcement officers and other parties to perform multiple tests - a costly endeavour. This two-part approach has been used in other federal fuels regulations.

B.11: Why is the definition of gasoline different from that in the Sulphur in Gasoline Regulations and Benzene in Gasoline Regulations? Why is the definition of diesel fuel different from that in the Sulphur in Diesel Fuel Regulations?

The definitions in the Renewable Fuels Regulations were initially developed from the definitions in other federal fuel regulations. Differences were introduced only where warranted by the differing circumstances of the Renewable Fuels Regulations.

B.12: Why is it necessary to define finished and unfinished gasoline?

The regulations include two categories of gasoline: finished gasoline and unfinished gasoline. Finished gasoline is that which is ready to be used by the final consumer (with a "road" octane level of at least 86), while unfinished gasoline is sub-octane (from 80 to less than 86) material that needs the addition of additional blending material (likely renewable fuel) to make it ready for use by the final consumer.

While it is the volume of gasoline (both finished and unfinished) that comprises a primary supplier's gasoline pool, to ensure proper monitoring and enforcement of the regulations, Environment Canada needs to be able to understand the movements of unfinished gasoline. Primary suppliers are therefore required to record and report on volumes of finished and unfinished gasoline, separately, under sections 29 and 30 of the regulations.

B.13: Is kerosene to be included in my distillate pool?

Kerosene is a distillate fuel and it generally meets the specifications in paragraph (b) of the definition of diesel fuel in the regulations. If represented as kerosene and sold or delivered for use in unvented space heaters, wick-fed lamps or flue-connected stoves and heaters, kerosene may be excluded from your pool under paragraph 6(4)(f) of the regulations. There is also an exclusion for fuel sold for or delivered for use in aircraft under paragraph 6(4)(a). Other than the exceptions set out in subsection 6(4), kerosene meeting the compositional requirements and other criteria of diesel fuel under paragraph (b) of the definition, is to be included in your distillate pool.

B.14: What is "liquid petroleum fuel" and why does it need to be defined?

Liquid petroleum fuel is any liquid hydrocarbon-based fuel, including gasoline, diesel fuel and heating distillate oil, and may contain renewable fuel. Because renewable fuel added to any liquid petroleum fuel may create compliance units, this fuel needs to be defined.

B.15: Can "liquid petroleum fuel" have renewable content? If so, how much?

Yes, a liquid petroleum fuel may contain renewable fuel. There are limits on how much renewable fuel may be contained in a liquid petroleum fuel and still create a compliance unit. These are 85% for gasoline, and 80% for all other liquid petroleum fuels.

B.16: If I produce a liquid petroleum fuel that does not meet the physical parameters of gasoline, diesel fuel or heating distillate oil, is it covered by the regulations?

If you sell or represent this fuel as gasoline, diesel fuel or heating distillate oil, or as fuel suitable for use in a spark-ignition or diesel engine, then the volume of this fuel is to be included in any pool you are required to calculate.

If it is not so sold or so represented, you may chose to create compliance units under sections 13 or 14 of the regulations if you add renewable fuel to it, providing you are a participant in the trading system.

B.17: What is a renewable fuel?

A renewable fuel is any liquid fuel that meets the definition of "renewable fuel" in the regulations. It must be liquid and produced from one or more of the substances listed in the definition of "renewable fuel feedstock". It may contain some non-renewable material, with prescribed maxima. For the purposes of these regulations, ethanol and biodiesel are explicitly defined to be renewable fuels and spent pulping liquor is explicitly excluded from being a renewable fuel.

B.18: Why is spent pulping liquor excluded from being considered a renewable fuel?

As with the requirements in the U.S., the focus of the Canadian regulations is on the renewable content of transportation fuels. However, unlike in the U.S., the Canadian approach has the additional flexibility of giving credit for adding renewable fuel to non-transportation fuels. Generally, this flexibility is not seen as significantly diminishing the renewable content of Canadian transportation fuels. However, that would not be the situation if spent pulping liquor were considered under the regulations to be a renewable fuel.

Spent pulping liquor, including "black liquor", is a by-product of chemical pulping processes in pulp and paper facilities and may be burned as fuel to produce electricity in those facilities. It is derived from wood products and could be considered to be a renewable fuel in a loose, general sense, although it may contain quantities of chemicals that are not manufactured from renewable feedstocks. The volume of the spent pulping liquor currently being used as fuel in Canada is far larger than the volume of transportation-type renewable fuels being used now or anticipated to be used as a result of the regulations. Consequently, if spent pulping liquor were not excluded from the definition of renewable fuel for the purposes of these regulations, the number of compliance units generated from the use of spent pulping liquor as a fuel could saturate the trading system and thus limit the transportation-type renewable fuels that would be required and produced in Canada.

The use of spent pulping liquor as a fuel in the pulp and paper sector was promoted through other Government programs, such as the Pulp and Paper Green Transformation Program.

B.19: Why are biodiesel and ethanol explicitly included in the definition of "renewable fuel"?

Biodiesel is the most common form of renewable fuel for use in diesel engines, and will be for the foreseeable future, so an explicit inclusion was warranted.

Ethanol is the most common form of renewable fuel for use in gasoline engines and will be for the foreseeable future, so an explicit inclusion was warranted.

B.20: Biodiesel is considered to be diesel fuel under the Sulphur in Diesel Fuel Regulations. Does that mean that it is a liquid petroleum fuel under these regulations?

No, it is not. Under the Renewable Fuels Regulations, biodiesel is a renewable fuel. Renewable fuels are not liquid petroleum fuels (although liquid petroleum fuels may contain renewable fuels), so "neat" biodiesel is not a liquid petroleum fuel.

B.21: How much non-renewable material may a renewable fuel contain?

A renewable fuel may contain small quantities of non-renewable material. It may contain additives and other non-renewable substances, provided that the combined volume of these substances is less than 1.5% of the volume of the fuel.

If the renewable fuel is ethanol, it may contain a hydrocarbon-based denaturant to render the fuel unsuitable for use as a beverage, of up to 4.76% of the volume of the ethanol. It may also contain up to 1% water and 1% other non-renewable substances.

B.22: Are the levels of non-renewable substances allowed in renewable fuel specified in percent by volume or percent by mass?

The levels are all specified in percent by volume.

B.23: How much denaturant can a renewable fuel contain?

If the renewable fuel is ethanol, it must contain a hydrocarbon-based denaturant to render it unsuitable for use as a beverage. The minimum volume of denaturant is 0.96% of the total volume of the ethanol, while the maximum volume is 4.76%. Ethanol that does not contain any denaturant is not considered a renewable fuel for the purposes of these regulations. Other renewable fuels may not contain denaturants.

B.24: I add denaturant to pure ethanol. Does this activity make me a producer of ethanol as defined by the regulations?

The pure ethanol you started with is neither "ethanol" nor "renewable fuel" under the regulatory definitions. If the resulting ethanol has denaturant content of at least 0.96% of the total volume of the ethanol and not more than 4.76%, then under the regulation, yes, you would have produced that ethanol. In such a case, you would be subject to the requirements of the regulation that apply to producers of renewable fuels.

B.25: I import "natural gasoline" (i.e. unprocessed gasoline) as a denaturant for ethanol. Does this activity make me a primary supplier as defined by the Regulations?

If the natural gasoline does not meet the definition of gasoline under these Regulations, it would not be covered by the Regulations and you would not be considered as a primary supplier. However, if the natural gasoline meets the definition of gasoline under these Regulations, it would be covered and you would be considered as a primary supplier.

B.26: I import ethanol without any denaturant. Does this activity make me an importer of renewable fuel as defined by the Regulations?

No, it does not. Ethanol, as defined in the Regulations, must contain a denaturant. Refer to questions B.23 and question B.24B.24.

B.27: How much water can a renewable fuel contain?

For biodiesel and renewable fuels other than ethanol, the combined volume of water and other non-renewable substances cannot exceed 1.5% of the volume of the fuel.

For ethanol, water content cannot exceed 1.0% of the volume of the ethanol, while the combined volume of all other non-renewable substances cannot exceed 1.0%.

B.28: If I import ethanol with a water content of higher than 1% or ethanol that does not contain a denaturant, have I imported a renewable fuel?

No, you have not. Such ethanol does not meet the definition of "ethanol" in the regulations and hence is not considered to be a renewable fuel for the purposes of the regulations.

B.29: I own and operate a plant which dehydrates ethanol that initially has a water content higher than 1%. Does this activity make me a producer of ethanol as defined by the regulations?

Ethanol with water content higher than 1% does not meet the definition of "ethanol" in the regulations and hence is not considered to be a renewable fuel for the purposes of the regulations.

If the resulting dehydrated ethanol has a water content less than 1% and meets the other criteria in the definition of "ethanol", then under the regulations youwould have produced the ethanol. In such a case, you would be subject to the requirements of the regulations that apply to producers of renewable fuels.

B.30: How do I determine whether ethanol or biodiesel that I buy was made from one of the renewable feedstock types?

Subsection 32(9) of the regulations requires that anyone creating compliance units from renewable fuel must have "documentation that establishes that the fuel is renewable fuel as defined [by the regulations]." You may wish to ensure that you receive records from the seller of the renewable fuel that provide this documentation.

B.31: What if I cannot determine whether ethanol or biodiesel that I buy was made from one of the renewable feedstock types?

Subsection 32(9) of the regulations requires that anyone creating compliance units from renewable fuel must have "documentation that establishes that the fuel is renewable fuel as defined [by the regulations]." You may wish to ensure that you receive records from the seller of the renewable fuel that provide this documentation.

B.32: Does a renewable fuel have to meet a series of specification, such as those listed in a standard published by the Canadian General Standards Board?

The regulations do not specify standards for renewable fuel beyond the maximum content of non-renewable substances. Renewable fuel is defined in the regulations as being produced from one or more of the listed renewable fuel feedstocks. Ethanol must contain some denaturant (up to 4.76%) and may have some non-renewable content (up to 1.0%). Biodiesel and other renewable fuels (other than ethanol) may have up to 1.5% non-renewable content.

Many commercial arrangements and some provincial regulations require that the renewable fuel meet a series of specifications. In addition, there are commercial standards for gasoline containing up to 10% ethanol by volume (E10) and for diesel fuel containing up to 5% biodiesel by volume (B5).

B.33: How was the list of renewable fuel feedstocks developed?

The list began with the feedstocks acceptable in the U.S. Renewable Fuel Standard. It was then adjusted through consultations with the Industry Technical Advisory Group (a group of technical experts from the petroleum and renewable fuel industries).

B.34: Do the regulations specify how the conversion of the various renewable fuel feedstocks must be done?

No, they don't.

B.35: Is waste carbon dioxide a renewable fuel feedstock?

No, it is not, but it may be used in the production of renewable fuel feedstocks, such as in the growth (or production) of algae.

B.36: Is spent pulping liquor a renewable fuel feedstock?

Spent pulping liquor contains solvents and other chemicals that are not made from renewable sources. If these chemicals are removed so that the remaining liquid is made from renewable sources, the remaining liquid would only be considered to be a renewable fuel feedstock if it meets the regulation's definition of "renewable fuel feedstock".

B.37: What is biocrude?

Biocrude is a feedstock used in a petroleum refinery that is derived from one or more renewable fuel feedstocks. It replaces, in part, conventional crude oil. Because the biocrude is used in producing the various fuels at a refinery, most of the fuels will contain some level of renewable fuel, depending on the type of biocrude used as a feedstock and the processes used to produce the fuels.

A renewable fuel feedstock used in a facility other than a petroleum refinery may be producing a renewable fuel. In this case, the feedstock would not be "biocrude" under the regulations.

B.38: Why are refiners allowed to get credit for mixing biocrude with petroleum crude oil?

Biocrude, which is made from renewable fuel feedstocks, displaces the use of petroleum crude oil and introduces some level of renewable content into one or more of the fuels that a refinery produces. Allowing the creation of compliance units from the use of biocrude provides an additional compliance option for regulatees, while maintaining the overall requirement for renewable content in liquid petroleum fuels.

B.39: Doesn't the biocrude end just up in the bottoms of the distillation unit and not in the final products of gasoline, diesel fuel and heating distillate oil?

The renewable content introduced into fuel products by the use of biocrude in a production facility will end up in a variety of final fuel products - which ones will be highly dependent on the type of biocrude used and the refinery processes used to create the fuel products. Based on consultations with the Industry Technical Advisory Group (a group of technical experts from the petroleum and renewable fuel industries), the regulations differentiate between two types of biocrude and assign different yield factors for the creation of compliance units. As more information becomes available in the future on the types of biocrude and their uses and yields, new types of biocrude may be introduced and the existing yield ratios might be adjusted through amendments to the regulations.

B.40: Why is triglyceride-derived biocrude explicitly defined?

While there are various types of biocrude, one type, triglyceride-derived biocrude, is expected to be used primarily in the production of distillate fuels, and not in other petroleum fuels. As such, the creation of compliance units from the use of this type of biocrude is treated differently from the other types of biocrude.

B.41: What is high-renewable-content fuel?

High-renewable-content fuel is a liquid petroleum fuel that has a higher than typical renewable fuel content. Compliance units for high-renewable-content fuels are created upon proof of blending or importation and are conditional upon proof of either use as a fuel in a combustion device or of being sold for use in a combustion device. This more stringent condition is required because of the greater potential for high level blends to be re-blended to create duplicate compliance units. In addition, there are also associated provisions requiring records establishing that the consumers of high-renewable-content fuels were informed about the nature of the fuel.

The threshold between high-renewable-content fuels and lower blends is 10% for gasoline, 5% for diesel fuel, and 25% for any other fuel. These blend thresholds align with the blend levels that are currently accepted in the marketplace and for which vehicle manufacturers warranty engines.

The maximum renewable fuel content of high-renewable-content fuel is 80% for non-gasoline fuels, based on a U.S. level for diesel fuel. For gasoline, the maximum level is 85% to allow for the use of E85. See also questions and answers in section L regarding limitations on creation of compliance units.

Renewable fuels that are chemically indistinguishable from liquid petroleum fuels (e.g., renewable diesel) are not covered by the definition of "high-renewable-content fuel".

B.42: What is a neat renewable fuel?

The regulations define neat "renewable fuel" as either (a) biodiesel, or (b) a renewable fuel that is produced at a facility that uses only renewable fuel feedstocks, is suitable for use in a combustion device and is chemically indistinguishable from any liquid petroleum fuel that is suitable for use in a combustion device.

B.43: Does "neat renewable fuel" include ethanol and biodiesel?

Neat renewable fuel is explicitly defined to include biodiesel. A fuel that is chemically distinguishable from a liquid petroleum fuel, such as ethanol, is not considered to be a neat renewable fuel for the purposes of the regulations, even though it is a renewable fuel.

B.44: Is pyrolysis oil considered renewable fuel? Is it a neat renewable fuel? Is it a biocrude?

Pyrolysis oil may meet the definition of renewable fuel and could theoretically create compliance units under sections 13 and 14 of the regulations. However, due to its physical properties, pyrolysis fuel is unlikely to be blended with liquid petroleum fuels.

As pyrolysis oil is not indistinguishable from petroleum fuels, it is not a "neat renewable fuel," as defined by the regulations. Consequently, the use of 100% pyrolysis oil cannot create compliance units under section 16 of the regulations.

Pyrolysis oil may meet the definition of biocrude. If it does, compliance units could be created under section 15 of the regulations from the use of pyrolysis oil as a feedstock at a refinery.

B.45: Is liquefied biogas considered renewable fuel?

The Regulations define "renewable fuel" as encompassing only liquid fuels. As liquefied biogas is not in a liquid form at standard ambient temperature and pressure conditions, it is not "renewable fuel" under the Regulations.

B.46: What is a neat renewable fuel consumer and why is it necessary to define it?

Compliance units may be created when a neat renewable fuel is used by the producer or importer of the neat renewable fuel as a fuel in a combustion device, or if the neat renewable fuel is sold to a consumer for use as a neat fuel in a combustion device. This consumer, the "neat renewable fuel consumer", is, in order of precedent: (1) the owner of a retail or card-lock facility, (2) the owner of a fleet into which the fuel is to be dispensed, and finally (3) the person who combusts the fuel. This structure is intended to avoid placing the administrative requirements of the regulation on owners of retail facilities. It ensures that compliance units are created by persons who are most likely to be otherwise participants in the trading system, and helps ensure that compliance units are available to primary suppliers.

It is important to note that it is the sellerof the neat renewable fuel to the neat renewable fuel consumer that creates the compliance units, not the neat renewable fuel consumer. Refer to paragraphs 16(1)(a) and 16(2)(a).

B.47: How is neat renewable fuel different from fuel produced from biocrude?

Biocrude is defined as a renewable feedstock that is used in a conventional petroleum refinery in conjunction with crude oil and other petroleum-derived feedstocks. Neat renewable fuel is produced at a facility that does not use any crude oil or other petroleum-derived feedstocks (e.g., a "bio-refinery"). Compliance units can be created through the use of either biocrude or neat renewable fuel.

B.48: What is the purpose of the trading period?

All compliance periods end on December 31. The regulations provide a three-month true-up period that allows the trading of compliance units for a given compliance period until the end of March. This period provides some additional time for primary suppliers to review their records and assess their compliance with the renewable fuel volume requirements of these regulations. If a primary supplier finds itself short of the required amount of compliance units needed to meet its obligations under the regulations, or alternatively, if it has a surplus of compliance units, it may wish to enter into trades with other participants. The trading period allows time for primary suppliers to find a trading partner and complete such transactions.

B.49: Who is an authorized official?

An "authorized official" is defined in section 1 of the regulations. In respect of a corporation, an authorized official is an officer of the corporation who is authorized to act on its behalf. In respect to any other person (whether an individual, a commercial entity or a government body) the authorized official is the person authorized to act on behalf of the individual, commercial entity or government body. In respect of any other entity, it is a person authorized to act on its behalf. This definition has been used in other federal fuels regulations (e.g., the Benzene in Gasoline Regulations and the Sulphur in Gasoline Regulations)

B.50: Can an officer of a corporation delegate an official or staff member of the corporation to act on his or her behalf for the purposes of being an "authorized official"?

No.

B.51: How was the definition of military combat equipment developed?

The definition was developed in consultation with the Department of National Defence.

B.52: Why does "scientific research" exclude marketing research?

This definition has been used in other federal fuel regulations (e.g., the Benzene in Gasoline Regulations and the Sulphur in Gasoline Regulations). Fuel sold for or delivered for use in scientific research may be excluded from a primary supplier's pool. This term is intended to include only pure scientific research. To ensure that the exclusion is not abused, the definition makes it clear that marketing research and similar research into the preferences of consumers is not considered to be scientific research.

B.53: Why is "month" defined?

For the purposes of the regulations, a month is generally defined as a calendar month. However, for the period December 15, 2010 to January 31, 2011, a "month" is defined as that entire period. This is done for convenience of the regulatee so that they can combine the records for the half month of December 2010 with the full month of January 2011.

Section 2 - Application

C.1: I am a small-volume importer (or producer) of gasoline, diesel fuel or heating oil. Am I a primary supplier under these regulations?

Yes, the regulations do apply; however, if your volume is less than 400 m³ per year, you are exempted from many, but not all, requirements.

C.2: What volumes do I include in determining whether I am above or below the 400 m³ threshold specified in subsection 2(1)?

The volume calculated for the purposes of subsection 2(1) includes the sum of the volume of all batches that you produce and import. No exclusions (such as those listed in subsection 6(4)) apply to this calculation. The calculation is done separately for gasoline and for diesel fuel and heating distillate oil. For example, if a primary supplier produces and imports in a year 300 m³ of non-excluded diesel fuel and 200 m³ of excluded diesel fuel (under section 6), its total volume would be 500 m³. The primary supplier is therefore above the 400 m³ threshold. Note that the primary supplier can exclude 200 m³ from its pool (as per section 6), but it must have renewable fuel content in the remaining 300 m³.

C.3: Why do most of the regulations not apply to small-volume producers and importers? What parts do apply?

The regulations have extensive recordkeeping, reporting and auditing requirements to ensure the robustness and enforceability of the regulations in general and of the system of tradeable compliance units. Imposing these full requirements would be a considerable burden to small-volume importers and producers (although there are no small-volume producers of gasoline, diesel fuel or heating distillate oil currently operating in Canada).

The regulations specify a volume threshold for small volume importers and producers, under which, these persons are not subject to the majority of the requirements of the regulations. The threshold for small-volume importers and producers in a given year is 400 m³ of gasoline and 400 m³ of diesel fuel and heating distillate oil. The threshold for small-volume producers is the same. During the first compliance period, which is longer than a year, the volume is to be determined over each consecutive twelve-month period (refer to question C.4).

For example, if a person imports in a year 300 m³ of gasoline and 300 m³ of diesel fuel, most of the regulations would not apply to this importer.

On the other hand, if a person imports in a year 300 m³ of gasoline, 300 m³ of diesel fuel and 300 m³ of heating distillate oil, the regulations would apply in full to this importer, since it imported over the threshold; that is, 600 m³ of diesel fuel plus heating distillate oil. Note that both the renewable fuel requirement for gasoline (5%) and the renewable fuel requirement for diesel fuel and heating distillate oil (2%, once in place), will apply to this person, regardless of its imports being below the threshold for gasoline.

Note also that this is a combined threshold for production plus importation. For example, a person who imports less than 400 m³ of gasoline per year, but produces more than 400 m³ of gasoline per year (even if they do not produce or import diesel fuel or heating distillate oil) would be required to comply in full with the regulations in respect of the renewable fuel requirements.

The threshold of 400 m³ per year is explicitly set out in subsection 140(3) of the Canadian Environmental Protection Act, 1999. It cannot be changed by any regulations made under that Act.

While the majority of the requirements do not apply to small volume producers and importers some requirements do apply in order to verify that a primary supplier is indeed below the threshold. Specifically, the following requirements set out in the regulations apply:

  • to make records, under section 29, for each batch of fuel produced and imported (type of fuel, the volume of fuel, where the fuel was produced or into which province it was imported, and the date of production or importation);
  • to keep these records and supporting documentation in Canada for five years, pursuant to section 38;
  • to make these records as soon as feasible (but no later than 15 days after the information becomes available), under section 37; and
  • to measure volumes in accordance with section 4.

C.4: Why are these provisions based on less than 400 m³ of fuel "during every period of 12 consecutive months in the gasoline [or distillate] compliance period"? What is meant by that phrase?

The period over which the threshold value is to be determined is a "year", which is defined to be a period of 12 consecutive months. Each compliance period, other than the first one, is a single calendar year (i.e., January to December).

The first gasoline compliance period is 24½ months, and consists of parts of three calendar years. If a person exceeds the threshold of 400 m³ during any 12 consecutive month periods during that first compliance period, they must comply with the regulations in full. Examples of 12 consecutive month periods are: December 15, 2010 to December 14, 2011; November 1, 2011 to October 31, 2012; and January 1, 2012 to December 31, 2012.

C.5: When does the period start for the determination of the threshold for production and importation of 400 m³ per consecutive twelve-month period?

It starts at the beginning of each compliance period, with the first one starting December 15, 2010 for gasoline and July 1, 2011 for diesel fuel and heating oil.

C.6: I only import (or produce) special use fuels. Am I a primary supplier under these regulations?

Yes, you are a primary supplier under the regulations; however, you are exempted from many, but not all, requirements.

C.7: Why do most of the regulations not apply to producers or importers of only special-use fuels?

The majority of the requirements do not apply to a primary supplier who only imports and/or produces special use fuels (e.g., fuel for use in aviation and competition vehicles, diesel fuel and heating distillate oil for use in military combat equipment, fuel for export, etc.). Consequently extensive recordkeeping and reporting requirements are not warranted.

However, some parts of the regulations do applyto these primary suppliers, specifically, the requirements:

  • to make records, under section 29, for each batch of fuel produced and imported (type of fuel, the volume of fuel, where the fuel was produced or into which province it was imported, and the date of production or importation);
  • to keep these records, and supporting documentation in Canada for five years, pursuant to section 38;
  • to make records as soon as feasible under section 37 (but no later than 15 days after the information becomes available);
  • to measure volumes in accordance with section 4; and
  • to have a record that establishes that the fuels were indeed sold for, or delivered for, the specified use (this is to verify that a primary supplier produced or imported only applicable special-use fuel).

C.8: I'm a primary supplier and sell fuel only in Newfoundland or in the North. Do these Regulations apply to me? Which records must I maintain? Can I create compliance units?

Yes, as a primary supplier the Regulations apply to you. However, as all the fuel you produce and import is one of the excluded fuels under subsection 6(4), various recordkeeping and reporting provisions do not apply to you. These include the recordkeeping provisions of paragraphs 29(b), (f) and (g) and sections 31 and 32, and reporting provisions of 30, 33 and 35. If you do not produce and import more than 400 m³ of renewable fuel, the audit report of section 28 also does not apply.

If you wish to create compliance units, you must opt-in to the requirements of the Regulations, as per section 3. Once you opt-in, you may create compliance units, however all of the requirements of the Regulations apply to you, including the 5% and 2% renewable fuel requirements of section 5. See also questions D.1 to D.7.

C.9: As a small-volume producer or importer of renewable fuel, what obligations do I have?

Producers and importers of less than 400 m³ a year of renewable fuel are not required to keep specific records or submit registration or annual reports under section 34 of the regulations. However, they must have supporting documentation to demonstrate that they produced or imported less than the threshold volume.

You may choose to have the regulations apply to you and opt in under section 3 of the regulations. In that case, you must meet all the requirements of the regulations. See also questions D.1 to D.7.

C.10: If I produce or import less than 400 m³ of fuel in a year, but in previous years I had exceeded that threshold, does the exemption apply to me during that the low-volume year? Similarly, if in one year I only produced or imported specialty-use fuels, does the exemption apply in that one year?

Yes, the exemptions apply on a year-to-year basis.

C.11: Under what circumstances is the auditor's report not required?

To be excluded from having to submit an auditor's report, a person must meet a number of criteria during the year for which the audit would be required. Specifically, the person must:

  • produce and/or import less than 400 m³ of gasoline and produce and/or import a combined volume of less than 400 m³ of both diesel fuel and heating distillate oil and produce and/or import less than 400 m³ of renewable fuel, or
  • produce and/or import only specialty-use fuels (of any volume) and produce and/or import less than 400 m³ of renewable fuel.

For example, a primary supplier of gasoline above the small-volume threshold for gasoline is not exemptfrom submitting an auditor's report just because it does not produce or import any renewable fuel. Similarly, a renewable fuel importer who imports above the small-volume threshold for renewable fuel is not exempt from submitting an auditor's report just because it did not import any heating distillate oil.

C.12: Is there an exclusion for fuel imported in the fuel tank of a vehicle, as there is in other federal regulations?

Subsection 2(5) provides that the regulations do not apply in respect of a fuel that is imported in a fuel tank that supplies the engine of a conveyance that is used for transportation by water, land or air.

C.13: If I only import fuel in the fuel tank of a vehicle, am I a primary supplier?

No, you are not a primary supplier since, under subsection 2(5), these regulations do not apply in respect of such fuel.

Section 3 - Special Opt-in Provisions

D.1: Who would want to opt into a regulation that they are otherwise excluded from?

A person may wish to opt into the regulations if they determine there is a financial benefit to be had from them doing so. For example, a person importing small quantities of E85, or competition fuel with renewable content, may wish to create compliance units and sell them to other primary suppliers.

D.2: Can I opt into the regulations in order to create compliance units if I am a small-volume producer or importer, or if I only produce or import special-use fuels?

Yes, you may. Regardless of any exemptions under section 2 of the regulations, a person may opt into the requirements of the regulations. However, you would then become subject to the regulations in full, including the renewable fuel content requirements and all recordkeeping, reporting and audit requirements.

D.3: What parts of the regulations apply to me if I do opt into the regulations?

The regulations apply in full to anyone who uses subsection 3(1) of the regulations to opt into the regulations, including the provisions for minimum renewable fuel content in gasoline, diesel fuel and heating distillate oil, the submission of a registration report, an annual report, an auditor's report and all recordkeeping requirements.

D.4: How do I opt in to the regulations?

You opt in by sending a written notice to the Minister to that effect, specifying a date on which the regulations will begin to apply to you. You must also send the applicable registration information under Schedule 1 or 6 of the regulations and the report on measurement methods under Schedule 8.

D.5: Can I opt out of the regulations if I later change my mind?

A person may rescind an opt-in notice by sending a written notice advising Environment Canada that they are ending their participation as of a specified date. They must provide any outstanding reports and notices. They must also cancel any unused compliance units that they own as of the specified date. These requirements are described in paragraphs 11(3)(a), (b) and (c) of the regulations.

D.6: If I opt out of the regulations, what reports do I submit?

A person must submit all reports that apply to that person for that portion of the compliance period prior to the date that they end their participation. This includes the appropriate annual reports and the auditor's report if applicable.

D.7: If I opt out of the regulations, do I have to meet the renewable fuel requirements for the portion of the compliance period that is prior to the date that I end my participation?

Yes, you do.

Section 4 - Measurement of Volumes

E.1: Why do the regulations specify requirements for how volumes must be measured when no other federal fuels regulations do?

The regulated parameter under the Renewable Fuels Regulations is renewable fuel content and compliance is determined based upon volumes of renewable fuel, biocrude and liquid petroleum fuel. It is therefore essential that these volumes are determined accurately. Other federal fuel regulations control parameters that are relatively independent of volumes produced, imported or blended.

E.2: At what point do I measure the volume of a batch of liquid petroleum fuel produced at a production facility?

Volumes are to be measured on dispatch of the batch from the facility, except for the following two cases:

  • Fuel dispensed at a production facility into fuel tanks of vehicles or other mobile equipment is to be measured when the batch is sent to the fuel dispensing device or to the storage tank servicing that device. Alternatively, the measurement can be made when the batch is dispensed. Refer to paragraph 4(6)(b) of the regulations for details.
  • Fuel dispatched from a production facility via a series of railway cars in which the fuel flows between those railway cars may be measured during off-loading at the receiving facility, provided that both the loading and off-loading facilities are owned by the same person. (Refer to question E.28.)

E.3: Am I required to measure the volume of volume of a batch of liquid petroleum fuel produced at a production facility that is dispensed at the facility for use in non-mobile equipment?

No. Such volumes are not included in your pool and hence they do not need to be measured (refer to subsections 6(1) and (2) of the regulations).

E.4: Subsection 4(6) addresses measurement of volumes at a production facility. I am an importer who picks up fuel at a U.S. refinery. Do the volumes I pick up need to be determined in accordance with subsection 4(6)?

No. "Production facility" is defined to be a facility in Canada.

E.5: I produce gasoline blendstock or distillate blendstock and dispatch it from my production facility. Do I need to measure the volume of these batches? Do I include them in my pool?

If the fuel meets the definition of gasoline, diesel fuel or heating oil under these regulations, then you must measure the volume of batches that are dispatched and include them in your pool.

E.6: How must I measure volumes for the purposes of these regulations?

Volumes of fuels, including renewable fuels and biocrude, must be determined in one of two ways. You may determine the volume using either:

  • a measurement device that complies with the federal Weights and Measures Act and all regulations made under that Act, or
  • a measurement standard or method that is cited in the American Petroleum Institute's (API) Manual of Petroleum Measurement Standards, provided such a standard or method is applicable to the situation.

There are also provisions for circumstances were neither of these methods can be used (refer to question E.12), as well as transitional provisions (refer to question E.7).

You are required, under section 35 of the regulations, to provide the information in Schedule 8 of the regulations on how you will determine volumes.

Small volume (less than 400 m³ a year) producers and importers of renewable fuels, gasoline, diesel fuel or heating distillate oil and those that only produce or import special use fuels are not required to submit the information in Schedule 8, unless they opt into the regulations.

E.7: What if I generally use measurement methods cited in the APImanual, but do not follow them precisely?

You must measure volumes in accordance with a standard or method cited in the API manual. However, as it may take you time to make the adjustment to fully comply with the cited methods, so subsection 4(2) of the regulations allows for deviations from the cited methods for the first 180 days after the regulations come into force (that is, until February 19, 2011), provided that you describe the deviation in your report on measurement methods.

E.8: Will the information on any deviation from API methods be included in the report on measurement methods under section 35, or do I have to report the deviation in my registration report under section 9, 11 or 34?

The information on your deviation from API methods is reported under section 35 of the Regulations; specifically, you report it as per item 5 of Schedule 8.

E.9: Am I required to provide the description of a deviation in measurement standards or methods that I use during the first 180 days?

Yes, you must in the report on measurement methods, which is due at the end of this period. Item 5(c) of Schedule 8 includes the description of any deviation in measurement methods used during that 180-day period.

E.10: When is the 180-day transitional period finished?

The regulations were registered on August 23, 2010, so 180 days after that date is February 19, 2011.

E.11: How do I obtain copies of the API manual?

Copies of the Manual of Petroleum Measurement Standardscan be obtained from the American Petroleum Institute.

E.12: How do I measure volumes if I cannot measure them using the prescribed devices, standards or methods?

In unusual circumstances, the specified devices, standards or methods may not be applicable. In such a case, another method may be used, provided that the determination of the volume is made by a person who is independent of you and you obtain a record of the volume and the method used. In addition, you are also required to provide the information required under section 35 of the regulations.

E.13: How were these requirements for determining volume developed?

The volume determination requirements were developed in consultation with the Measurement subgroup of the Industry Technical Advisory Group (a group of technical experts from the petroleum and renewable fuel industries) during the spring and early summer of 2009. Adjustments were made based on comments received on the proposed regulations.

E.14: Is there an additional burden on the regulatee by having to use these prescribed ways of measuring volumes?

Since the measurement devices and the standards and methods referred to by the regulations are industry standards and already widely used in the fuels industry, it is not expected that this requirement will create undue burden on the regulatee.

E.15: Other federal fuels regulations require cubic metres as the units for volume, rather than litres. Why do these regulations specify litres?

For the Renewable Fuels Regulations, cubic metres are too large of a volumetric quantity in regard to compliance units. The U.S. requirements use gallons, rather than barrels or a larger unit as a volume metric. The Canadian regulations specify litres. However, the regulations include flexibility to use cubic metres for recording and reporting purposes, provided that certain records under various provisions of section 32 (in regards to compliance units) and section 29 (in regards to fuel dispensed into a vehicle's tank) are reported in cubic metres to three decimal places. Other records and reports may be recorded or reported in cubic metres to three, two, one or no decimal places.

E.16: If I decide to use cubic metres instead of litres, why must some of my records be recorded to three decimals whiles others do not?

For the purposes of these regulations, some records must be more precise than others. Records related to renewable fuel and thus to the creation of compliance units have to be recorded to three decimal places if cubic metres are used (i.e., to the same precision as if the records were in litres). This is to ensure that fractions of cubic metres are not rounded up to create additional compliance units.

Records on fuel used in on-site vehicles and other mobile equipment are also to be recorded to three decimal places. Since the fuel tanks of these vehicles may be less than 1 m³, this requirement is to ensure fractions of cubic metres are not continually rounded down to zero.

E.17: Can I use cubic metres as my units instead of litres even though many provisions explicitly refer to litres?

Yes, you may. Subsection 4(7) allows for this flexibility.

E.18: Why are the rules on rounding so complex?

The provisions on rounding must align with the provisions allowing for the flexibility to use cubic metres instead of litres. They must also account for the various levels of precision required if cubic metres are used.

E.19: Why are the rules on rounding percentage of a volume of renewable fuel that is determined for the purpose of the definition "high-renewable-content fuel" in subsection 1(1) or of subsection 17(1) different than for rounding volumes?

Rounding percentages for renewable fuel content is aligned with usual industry practice - it must be rounded to the nearest whole number percentage. If it is equidistant, then it is rounded to the nearest even whole number percentage (e.g., 10.50% becomes 10%, while 10.51% becomes 11%; 5.50% becomes 6%, while 5.49% becomes 5%).

E.20: The measurement methods may not be accurate for measuring to the nearest litre. How do I comply with the regulations which require reports and records on the basis of litres?

Volumes must be measured in accordance with the applicable standard or method, to within the limits of its precision and reproducibility. The volume that is to be recorded and reported for the purposes of these regulations is the volume that the standard or method determines.

E.21: Why must volumes be corrected for temperature?

It is general industry practice in Canada and in many other countries to correct the volume of a fuel to a standard temperature, and in some cases it is a regulatory requirement. It would add an unnecessary level of complexity and increased administrative burden if the regulations did not provide for temperature correction. The volume determination requirements, including corrections for temperature, were developed in consultation with the Measurement subgroup of the Industry Technical Advisory Group (a group of technical experts from the petroleum and renewable fuel industries) during the spring and early summer of 2009.

E.22: How do I correct volumes for temperature?

There are industry standard methods for correcting volumes for temperature (e.g., as described in the American Petroleum Institute's Manual of Petroleum Measurement Standards). Such methods are routinely used throughout Canada and elsewhere in the world.

E.23: Why can only importers correct their volumes to 60°F?

The Canadian industry standard temperature is 15°C. It is anticipated that most, if not all, companies operating in Canada already correct their volumes to this temperature. Importers from other countries may have corrected volumes to the Imperial standard of 60°F (or 15.6°C), or have had this correction already done by their supplier. The difference in the corrected volume between the two temperatures is not significant. To avoid unwarranted administrative burden, importers may use the Imperial standard temperature for volume correction under these regulations.

E.24: Am I required to correct volumes for temperature as soon as the regulations come into effect?

As it may take time to implement temperature corrections, subsection 4(5) of the regulations provides an initial 180-day grace period (until February 19, 2011) during which volumes do not necessarily need to be temperature corrected, unless the volume is measured in accordance with the Weights and Measures Act.

E.25: Why does the 180-day grace period for not having to correct for temperature not apply in respect of measurement devices complying with the Weights and Measures Act?

Environment Canada does not believe it appropriate or necessary to provide a grace period in this circumstance, as such measurements of volume are already routinely corrected for temperature.

E.26: Why must the volume of water contained in biocrude be subtracted from the total volume of the biocrude?

Biocrude may contain a significant quantity of water, which has no useful energy content and does not displace conventional crude oil. This water is usually removed from the biocrude by the refiner prior to its use as a feedstock in the refinery. The regulations require that the user of the biocrude mathematically subtract the volume of the water so that the water's volume is not counted towards the creation of any compliance units; it does not require that the water actually be extracted.

E.27: How do I determine the volume of water contained in biocrude?

Any method used will be situation-specific, depending upon refinery configuration and the nature of the biocrude. In the report required under section 35 of the regulations, a regulatee must provide detailed information on "the methodology for measuring and subtracting the water content of the biocrude."

E.28: I dispatch liquid petroleum fuel from a production facility via a series of railway cars in which the fuel flows between those railway cars. When do I measure volumes? What is so special about this circumstance?

Paragraph 4(6)(a) of the regulations addresses a situation where there is no established industry standard or method to measure fuel during on-loading into interconnected railway cars. This provision allows use of established industry standards or methods for measuring such volumes during off-loading at the receiving facility, provided that both the on-loading and off-loading facilities are owned by the same person. The provision accommodates a unique situation and does not impact the robustness of measurement as it pertains to these regulations.

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