renewable fuels unique considerations for incentives

RENEWABLE FUELS UNIQUE CONSIDERATIONS FOR INCENTIVES & COMPLIANCE

Ramboll Webinar – April 28, 2021

UNPREDICTABLE SPRING WEATHER

• Highly changeable weather can occur in the spring from snowstorms in the Rockies to tornados in the South

• Keep an eye on the weather forecast and plan your work and travel accordingly

• Dress in layers to accommodate rapid changes in weather

• Keep rain gear handy

MEET YOUR PRESENTERS

Robin Richards, REM

Principal

Abby Kirchofer, PhD

Managing Consultant

Melinda Truskowski

Principal and Global Energy Sector Leader

Brian Glover

Principal

David Liu, PhD

Principal

With the US making a renewed commitment to reducing GHG emissions,

addressing climate change and low-carbon fuel standards, many energy companies are committed to renewable fuels investments.

INTRODUCTION

Building new biodiesel/renewable fuels facilities

Flexing to add renewable fuels at existing facilities

Pivoting fossil fuel facilities to renewable fuel

RENEWABLE FUELSA GROWING INDUSTRY

Represented by only a few operational renewable diesel plants, the existing renewable diesel capacity in the US is approximately 553 million gallons per year

About 5.5 billion gallons per year of new or potential capacity is anticipated over the next few years from numerous facilities that are either planned or under construction

Ramboll has provided permitting and other environmental support for at least 11 of the existing and planned facilities

RENEWABLE FUELS FACILITIESA GROWING INDUSTRY

Existing renewable fuels facilitiesNorco, LADiamond Green Diesel, LLC (DGD Unit I)23,000 barrels per day

Dickinson, NDMarathon Petroleum Corporation12,000 barrels per day

Paramount, CAAltAir World Energy

2,600 barrels per day

Blaine, WABP Cherry Point

Barrels per day – N/A

Garnett, KSEast Kansas Agri-Energy300 barrels per day Geismar, LA

Renewable Energy Group (REG) (formerly Dynamic Fuels LLC)4,900 barrels per day

RENEWABLE FUELS FACILITIESA GROWING SOURCE OF LIQUID FUELS

Planned and prospective facilities

Existing facilitiesNorco, LADiamond Green Diesel, LLC (DGD Unit I)23,000 barrels per day

DGD Unit IIAnticipated: 2021, 26,000 barrels per day

Geismar, LARenewable Energy Group (REG) (formerly Dynamic Fuels LLC)4,900 barrels per day

Dickinson, NDMarathon Petroleum Corporation12,000 barrels per day

Paramount, CAAltAir World Energy


ExpansionAnticipated: 2022,

20,000 barrels per day Garnett, KSEast Kansas Agri-Energy300 barrels per day

Blaine, WABP Cherry Point

Barrels per day – N/A

Wynnewood, KSCVR WynnewoodAnticipated: 2021, 6,500 barrels per day

Bakersfield, CAAlon Global Clean Energy

Anticipated: 2021, 15,000 barrels per day

Lakeview, ORRed Rocks BiofuelsAnticipated: 2021, 1,000 barrels per day

Port Westward, ORNEXT Renewable FuelsAnticipated: 2021, 50,000 barrels per day

Hull, IAReadiFuelsAnticipated: 2021, 2,000 barrels per day

Martinez, CAMarathon Petroleum Corporation


Cheyenne, WYHollyFrontier


Artesia, NMHollyFrontier


Port Arthur, TXDiamond Green Diesel, LLC

(DGD Unit III)Anticipated: 2023,


Newton, ILSt. Joseph Renewable FuelsAnticipated: TBD, 6,000 barrels per day

Rodeo, CAPhillips 66


Baton Rouge, LAGrön Fuels


Chalmette, LAChalmette Refining LLCAnticipated: TBD, 20,000 barrels per day

Hastings, NEHeartwell RenewablesAnticipated: 2023, 80M gallons annually

LOW CARBON FUEL STANDARD (LCFS) & RENEWABLE FUEL STANDARD (RFS)01

RENEWABLE FUELSPROGRAMS

Multiple states have enacted alternative fuel mandates, standards or low carbon fuel standards: CA, HI, LA, MN, MO, OR, PA, WA

USEPA Renewable Fuel Standard (RFS)

• Sets annual Renewable Volume Obligations (RVOs) for Obligated Parties (OPs)

• Renewable Identification Numbers (RINs) are used to report and track volumes

• RINs and LCFS credits can be generated by the same fuel

0

5

10

15

20

25

30

35

40

2008 2012 2017 2022

Billion g

allons

Congressional Volume Target for Renewable Fuel

Renewable (D-6)

Biodiesel (D-4)

Advanced (D-5)

Cellulosic (D-3)

36 billion gallons of renewable fuel by 2022

Source: https://www.epa.gov/renewable-fuel-standard-program/overview-renewable-fuel-standard

Source: https://www.epa.gov/fuels-registration-reporting-and-compliance-help/rin-trades-and-price-information

Transfer Date by Week, FUEL (D Code)

$3

$2

$1

$0

RIN

Prices

2015 2016 2017 2018 2019 2020 2021

Weekly D3, D4, D5 and D6 RINs Prices

CALIFORNIA’S LOW CARBON FUEL STANDARD (LCFS) PROGRAM

• Administrated by California Air Resources Board (CARB), established goals to reduce carbon intensity (CI) of transportation fuel pool

• Incentivizes adoption of low carbon transportation fuels or technologiesbased on the fuel’s lifecycle GHG emissions per unit of energy (gCO2e/MJ) or CI score

• Life cycle assessment determines GHG emissions of production, transportation and use of a given fuel

• No expiration date for LCFS credits

• Growing market for credit transfers, total value in 2020 was $4.3 billion

LCFS CREDIT GENERATION OPPORTUNITIES

Low carbon fuel pathways

• Renewable diesel, biodiesel

• Alternative gasoline

• Corn ethanol, etc.

Project-based crediting

• Emission-reducing actions at refineries, crude oil production and transportation facilities

• CCS using Direct Air Capture (DAC)

Zero emission vehicle infrastructure

• Hydrogen refueling infrastructure

• Direct current (DC) fast charging infrastructure

• Low carbon fuel providers generate credits by obtaining a certified CI and reporting transaction quantities quarterly

• Verification occurs after credits are generated

• Credits are calculated relative to the annual CI benchmarks

• Project operators generate credits through GHG reductions

• Verification occurs before credits are issued generation

• Credits are equal to the lifecycle GHG reductions (metric tons)

• Capacity-based mechanism (2018 amendments) to encourage deployment of zero emission vehicle (ZEV) infrastructure

• Credits based on capacity of station when fully utilized, less quantity of fuel dispensed/credited through fuel pathways

Type Overview

COMPLIANCE

Application/report type

Applicable entities

Fuel pathway applications (CI)

• Any person that applies* (e.g., alternative fuel producers)• Joint applicants (e.g., specified-source feedstock suppliers)

Annual fuel pathway reports (CI)

• Certified fuel pathway holders* including provisional pathway holders

• Joint applicants (e.g., specified-source feedstock suppliers)

Fuel transactions reports

• Entities submitting quarterly fuel transaction reports that include transaction types under §95500(c)(1)(A)-(D)

Crude oil volumes reports

• Producers and importers of CARBOB and diesel

Low-complexity/low-energy-use reports

• Refineries that meet eligibility under §95489(d)(1)(A)-(B)

Project reports • Project operators and joint applicants of oil or gas production, crude oil production, crude oil transportation and/or refineries, that implement specified renewable hydrogen, carbon capture, refinery investment and/or innovative crude oil transportation and production projects

Compliance-related opportunities

Pathway development

Streamlined reporting

Quality assurance

3rd party verification

PROJECT LIFECYCLE

Plan/ design

Construct

Marketing/ disclosures

Operate

• LCFS compliance(reporting, verification)

Permits/entitlements

A broader view of LCFS-related value generation opportunities

• AQ/GHG compliance andpermitting

• CEQA/NEPA process

• Water and wastewater

• Project definition

• Carbon strategy

• ESG strategy

• Business case development

• Techno-economic evaluation

• Investor engagement

• Carbon management,reporting and disclosure

• ESG disclosures

• Mitigation monitoring and reporting

• Carbon management,reporting and disclosure

• Carbon emissions trading

• Sustainability reporting

WATER/WASTEWATER02

RFF PROCESS – BLOCK FLOW DIAGRAMEXAMPLE

Basic processing included pretreatment, rearranging molecules across a catalyst in presence of hydrogen and fractionation.

Hydrogen plant

Hydro-deoxygenation

or Hydrotreating

Isomerization FractionationFeedstock

pretreatment

Renewable diesel unit

Propane

Naphtha

Diesel

Off gas

Sour waterPretreatment unit

wastewater

RBD soybean oil

Water

Rendered fatsCorn oil

WATER MANAGEMENT CONSIDERATIONS

New RFF

• Cooling and process water supply

• Steam supply

• Water balance: stripped sour water use

• Feedstocks: purchased pretreated or not

Refinery pivoting to RFF

• Less water demand thana refinery

• Treatment capacity existing WWTP

• Feedstocks: purchased pretreated or not

Refinery flexing HT/HC

• No impact (slightly less water demand, no change in influent quality)

• Feedstocks are purchased pretreated

HOW CLEAN DOES THE EFFLUENT NEED TO BE?MOVING PARTS TO WASTEWATER MANAGEMENT

• Water balance and projected effluent quality

• Categorical standards, Local Limits/sewer use ordinance; current pretreatment permit

Indirect discharge

• Water balance and projected effluent quality

• Technology-based effluent limits (BPJ)

• Mixing zone delineation and water quality-based effluent limits

• Compliance with antidegradation standard

Direct discharge

• Agency communications

• Permit application (or modification)Both

23

PRETREATMENT OF FEEDSTOCK

Degumming: water, acids and nanoreactor®

neutralization

Bleaching: bleaching earth additive –configuration wet/dry (or not)

Source: Applied Research Associates Hydrothermal Cleanup Unit (HCU)

Impurities removed to the water phase and sent to treatment:

Phosphorus, alkali metals and alkaline earth metals

Wastewater from pretreatment of feedstock (tallows, oils, greases) includes elevated levels of:

COD/BOD5, nitrogen compounds, phosphorus, VFAA, metals, salt

Water Oil Inorganics

WASTEWATER TREATMENT OPERATING OR PLANNEDRFF

• Primary treatment followed by air oxidation

• Primary treatment onlyIndirect

• Minimal treatment (e.g., oil water separators at sources)

• Treated through lagoon/pond system

• Treated through existing primary and secondary treatment wastewater treatment system

Direct: purchased pretreated feedstock

• Returned to be front-end of co-located ethanol plant

• Evaporated

• Existing biological treatment system capacity controls organic and nutrient loading sufficient or need dedicated feedstock pretreatment unit wastewater treatment

Direct: feedstock treated on site, feedstock pretreatment unit wastewater

WASTEWATER TREATMENT OF FEEDSTOCK PRETREATMENT UNIT WASTEWATERSEXAMPLE

Equalization

P-Chem:

nutrients and metals

Biological treatment

(e.g., moving bed bioreactor (MBBR)

Processes include:

Removals needed:

Nutrients (N and P)

Organics Metals

AIR PERMITTING03

RENEWABLE DIESEL & BIODIESEL PRODUCTION PROCESSES, & AIR EMISSIONS SOURCES

Fuel production process:Hydrotreating (hydroprocessing or hydrodeoxygenation) is a process utilized by petroleum refineries to remove contaminants such as sulfur, nitrogen, condensed ring aromatics, or metals by reacting with hydrogen in the presence of a catalyst.

For renewable diesel production, feedstock is reacted with hydrogen under elevated temperature and pressure to change the chemical composition of the feedstock. This process also results in propane as a by-product.

Biodiesel Renewable diesel

Fuel production process: Transesterification is a chemical process where an ester is reacted with an alcohol to form another ester and another alcohol.

For biodiesel production, triglyceride oils (esters) are reacted with methanol (alcohol) to produce biodiesel (fatty acid alkyl esters) and glycerin (alcohol).

Even though the production processes differ, biodiesel and renewable diesel can be viewed in the same way as it relates to regulatory applicability.

Common air emissions sources:

• Storage tanks

• Heaters/boilers

• Process vents

• Control devices (flare, dust collectors)

• Loading/unloading

• Fugitives and ancillary equipment (engines, CWTs)

REGULATORY APPLICABILITYREFINERY RULES

Renewable fuels facilities are NOT petroleum refineries

NOT subject to NSPS 60 Subparts J, Ja, GGG, GGGa, QQQ

• All are applicable to “affected facilities in petroleum refineries”

• “Petroleum refinery” is defined in each as producing products from “petroleum”

• “Petroleum” is defined as “crude oil removed from the earth and oils derived from tar sands, shale and coal”

NOT subject to MACT 63 Subparts CC or UUU

• CC applies to “petroleum refining process units” and “related emission points”

• UUU applies to “petroleum refinery”

• “Petroleum” not defined in these rules but should apply same definition as NSPS

NOT subject to NSPS 60 Subpart XX or MACT 63 Subpart R

• Applicable to “bulk gasoline terminals”

• “Gasoline” defined as “any petroleum distillate or petroleum distillate/alcohol blend”

REGULATORY APPLICABILITYSOCMI RULES

Renewable fuels facilities are NOT SOCMI facilities

NOT subject to NSPS 60 Subparts VV, VVa

• Applicable to “affected facilities in the synthetic organic manufacturing industry”

• “Affected facility” is defined as group of all equipment within a process unit

• “Process unit” is defined “to produce one or more of the chemicals listed in 60.489”

• Diesel, LPG, propane, butane, naphtha, jet fuel are not listed chemicals

NOT subject to MACT 63 Subparts F, G or H

• Again, not producing listed SOCMI chemicals under these rules

NOT subject to NSPS 60 Subparts NNN or RRR

• Applicable to “affected facility…that is part of process unit that produces any of the chemicals listed in” 60.667 (RRR) as a product, co-product, byproduct, or intermediate” or 60.660 for NNN

• Renewable fuels are not listed chemicals

REGULATORY APPLICABILITYWHAT WOULD APPLY?

Based on Ramboll's experience, the following regulations would apply:

NSPS 60 Subpart Kb – Volatile Organic Liquid Storage Vessels

NESHAP 61 Subpart FF – Benzene Waste Operations NESHAP (BWON)

MACT 63 Subpart FFFF – Miscellaneous Organic Chemical NESHAP (MON)

CO-LOCATED VS. STAND-ALONE FACILITY

• Likely still separate sources under PSD because different SIC (2869 for RD vs. 2911 for Refinery)

• Activities under different SIC Major Groupings could belong to same industrial grouping if there is a “support facility” relationship for PSD permitting

• Taking advantage of shared utilities and operating efficiencies (i.e., utilizing refinery’s existing infrastructure) may not constitute a “support facility”

• May be considered same source for purposes of HAP major source status

Stand-alone renewable diesel or biodiesel

Co-located renewable with petroleum refinery or other

• Regulatory applicability should be straightforward

• Less likely to trigger major source thresholds for criteria pollutants or HAP

• No questions involving shared utilities or common control

Co-location offers operating efficiencies, especially for utilities and ancillary operations

• May be co-located with hydrogen plant

• Shared wastewater treatment, steam, fuel gas, etc.

• Shared storage and logistics –unloading and loading, rail/truck/marine, blending

• Shared sources can complicate regulatory analysis

PRODUCT REGISTRATION04

RENEWABLE FUELS – PRODUCT REGISTRATIONBACKGROUND

Renewable hydrocarbon biofuels areproduced from biomass sources throughthermal, biological and chemical processes

In the US, USEPA’s Renewable Fuel Standard (RFS) program requires the replacement of or reduction in the quantity of petroleum-based transportation fuel, heating oil or jet fuel by a certain volume of renewable fuels including:

• Biomass-based diesel

• Cellulosic biofuel

• Advanced biofuel

• Total renewable fuel

Biodiesel

Renewable diesel

• Produced by transesterification that converts fats and oils into fatty acid methyl esters (FAME)

• Meets American Society for Testing and Materials (ASTM) Standard D6751 and is approved for blending with petroleum diesel

• Produced by hydrotreating and isomerization processes that convert triglycerides and free fatty acids into paraffins (alkanes) with various carbon chain lengths and linear and branched structures

• Chemically the same as petroleum diesel fuel and meets ASTM Standard D975 for petroleum diesel and does not require blending with petroleum diesel

RENEWABLE FUELS – PRODUCT REGISTRATIONCHEMICAL COMPOSITIONS

RENEWABLE FUELS – PRODUCT REGISTRATIONGLOBAL REQUIREMENTS

01Companies who manufacture, importor process renewable fuels must ensure those substances are registered under the chemical control statues of their countries, such as:

• Toxic Substances Control Act (TSCA) in US

• New Substances Notification (NSN) in Canada

• Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) in EU

02Biomass-based fuels (and their feedstocks and intermediate process streams) may be considered “new chemicals” that require agency notification and approval prior to commercialization

US TOXIC SUBSTANCES CONTROL ACT (TSCA)NOTIFICATION REQUIREMENTS

01TSCA Section 5 requires manufacturers and importersof “new chemicals" (i.e., those not listed on the TSCA Inventory) to notify USEPA by submitting a Pre-Manufacture Notice (PMN)at least 90 days before manufacture or importation

02Low Volume Exemption, Test Marketing Exemption, and Research & Development exemption have notification and/or recordkeeping requirements

03Companies should evaluate TSCA new chemical notification requirements early on to avoid significant delaysin entry to market

TOXIC SUBSTANCES CONTROL ACTCHEMICAL IDENTITY ISSUES

Biodiesel and renewable diesel are considered

unknown or variable composition, complex reaction products, or biological (UVCB)

substances

Natural Source Descriptors for chemicals derived from certain animal or vegetable source; e.g., “fatty acids, soya”

Soap and Detergent Manufacturers Association (SDA) nomenclature for chemicals derived from natural fats and oils and their synthetic substitutes; e.g., “C10-C16 alkyl dimethyl amine”

Alkyl Ranges using Cx-y Notation, e.g., “Alkanes, C8-16, branched and linear” or mixtures

American Petroleum Institute (API) nomenclature for refinery streams; e.g., “Fuels, diesel” defined as “A complex combination of hydrocarbons produced by the distillation of crude oil. It consists of hydrocarbons having carbon numbers predominantly in the range of C9 through C20 and boiling in the range of approximately 163°C to 357°C (325°F to 675°F).”

When determining TSCA inventory listing status, companies need to understand EPA’s nomenclature policies, guidance and options:

TOXIC SUBSTANCES CONTROL ACTOTHER KEY REQUIREMENTS

Other TSCA requirements for manufacturers, importers and processors of “existing” chemicals:

Violation of TSCA requirements can result in significant penalties, business disruptions and damage to corporate reputation

Section 5 Significant new use rules

Section 8(a) Chemical data reporting

Section 8(c) Significant adverse reactions

Section 8(e) Substantial risks reporting

Section 12(b) Export notification

Section 13 Import certification

ADDITIONAL CONSIDERATIONS

Odorsurvey

Spill Prevention, Control and Countermeasures

(SPCC) plan

Construction stormwater permitting and Stormwater Pollution

Prevention Plan (SWPPP)

California Environmental Quality Act

(CEQA) project

Air qualitymodeling

Risk management program (RMP)

Toxic Substances Control Act (TSCA) registration

Wetlands and waters of the US permitting

Wastewater management

THANK YOUQUESTIONS?

Melinda TruskowskiPrincipal and Global Energy Sector Leader+1 303 382 [email protected]

Brian GloverPrincipal+1 225 408 [email protected]

Abby Kirchofer, PhDManaging Consultant+1 415 426 [email protected]

David Liu, PhDPrincipal+1 949 798 [email protected]

Robin Richards, REMPrincipal+1 703 516 [email protected]

renewable fuels unique considerations for incentives

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