17 More Days Until Christmas! How Compliance Deadline Move the RFS Forward

December 8, 2021

The month of December really transforms me into the living impersonation of the Christmas spirit. I decorate my house (and the office), make Christmas cookies, and listen to and sing all the Christmas songs on repeat…much to the chagrin of my coworkers. However, the one Grinch-like item that many people have to deal with this time of year is: deadlines. Whether it’s buying that last present or trying to get the numbers to the boss, everyone is dealing with a deadline.

Under the Renewable Fuel Standard (RFS), obligated parties are required to retire RINs against their incurred Renewable Volume Obligations (RVOs) on an annual basis. If you read that sentence and didn’t understand any of it, I’ve written multiple articles on this topic. Start with Elementary Dear Watson: A Beginner’s Guide to the Renewable Fuel Standard, then read Easy Peesy Lemon Squeezy: The Ins and Outs of the Renewable Volume Obligation and finish with The Biofuels Trilogy: RINs, Renewable Volume Obligations, and the Renewable Fuel Standard. After you get done with all those articles (they’re short, I promise), come back to this one.

As we merrily continue, compliance deadlines not only drive the compliance process but also the renewable fuel industry as a whole. It’s a little bit like preventing the industry from experiencing a snowball effect: as long as compliance stays on schedule, all deadlines will be met. What does that look like, exactly? Essentially, the regulations require that annual and quarterly reports be submitted on a schedule. In general, quarterly reports are submitted about every three months and annual reports are submitted every year. Due to the nature of the information contained within an annual report, the regulations allow an obligated party a little bit more time to file their annual report with EPA. Think of it like Santa…having a list…and checking it twice…we both know you sang that last part!

Jingling right along, how does that affect the industry? A compliance deadline has the same function as any other deadline: it keeps everyone honest and up to date. Each year, EPA sets RVOs that obligated parties must comply with. They do this through retiring RINs. However, to make sure that this actually gets done, obligated parties are subject to an annual compliance deadline. With this pressure of an annual deadline, the RIN market progresses and grows to accommodate annual RVOs and the needs of obligated parties. In this way, compliance deadlines are like the period in a sentence: it gives everyone a completely necessary stopping point.

That being said, annual compliance deadlines also function like a RIN expiration date. The regulations require that the RINs that be used for an obligated parties’ compliance purposes were created (generated) in either the same compliance year as the incurred RVO or the compliance year immediately prior. For example, if you were obligated party with a 2021 RVO, you could only use RINs that were generated in 2021 or 2020 to fulfill your obligation. While a RIN from 2019 may have been perfectly generated and separated from a gallon of renewable fuel, the compliance deadline for that year of RIN has already passed, so you could not use it.

Do the elves at EPA ever move or extend compliance deadlines? Well, sometimes. While EPA moving compliance deadlines is about as common as seeing flying reindeer, it is not outside the realm of possibility. For example, last April EPA finalized a rule which extended compliance deadlines for obligated parties to account for the delay in releasing RVOs as well as a pending U.S. Supreme Court case. Even with this rare event, compliance deadlines still function to drive the RFS forward.

Are compliance deadlines really that big of deal? Well, the deadline itself, maybe not. But the consequence of missing one? That’s definitely a bigger deal…about as big as the Grinch’s heart grew to be. EPA does have the ability to level hefty fines for an entity that might not have met their obligation. So, it’s important to stay on top of them….even if it “’twas the night before Christmas, and not a creature was stirring, not even a mouse…”