Rule Summary (From EPA)
On June 26, 2018, EPA issued proposed volume requirements under the Renewable Fuel Standard program for cellulosic biofuel, advanced biofuel, and total renewable fuel for calendar year 2019. EPA also proposed biomass-based diesel volume standards for calendar year 2020. The proposed volume requirements are listed in the table below.
The Renewable Fuel Standard (RFS) program began in 2006 pursuant to the requirements in Clean Air Act (CAA) section 211(o) that were added through the Energy Policy Act of 2005 (EPAct). The statutory requirements for the RFS program were subsequently modified through the Energy Independence and Security Act of 2007 (EISA), leading to the publication of major revisions to the regulatory requirements on March 26, 2010. EISA’s stated goals include moving the United States (U.S) toward “greater energy independence and security [and] increase[ing] the production of clean renewable fuels.”
The statute includes annual volume targets, and requires EPA to translate those volume targets (or alternative volume requirements established by EPA in accordance with statutory waiver authorities) into compliance obligations that obligated parties must meet every year. In this action we are proposing the applicable volumes for cellulosic biofuel, advanced biofuel, and total renewable fuel for 2019, and biomass-based diesel (BBD) for 2020.3 We are also proposing the annual percentage standards (also known as “percent standards”) for cellulosic biofuel, BBD, advanced biofuel, and total renewable fuel that would apply to all gasoline and diesel produced or imported in 2019.
Today, nearly all gasoline used for transportation purposes contains 10 percent ethanol (E10), and on average diesel fuel contains nearly 5 percent biodiesel and/or renewable diesel. However, the market has fallen well short of the statutory volumes for cellulosic biofuel, resulting in shortfalls in the advanced biofuel and total renewable fuel volumes. In this action, we are proposing a volume requirement for cellulosic biofuel at the level we project to be available for 2019, along with an associated applicable percentage standard. For advanced biofuel and total renewable fuel, we are proposing reductions under the “cellulosic waiver authority” that would result in advanced biofuel and total renewable fuel volume requirements that are lower than the statutory targets by the same magnitude as the reduction in the cellulosic biofuel reduction. This would effectively maintain the implied statutory volumes for noncellulosic advanced biofuel and conventional biofuel.
Industry Feedback
ACE — American Coalition for Ethanol (ACE) CEO Brian Jennings issued the following statement on the Environmental Protection Agency’s (EPA) proposed Renewable Volume Obligations (RVOs) for the 2019 Renewable Fuel Standard (RFS):
“While EPA says it is proposing to maintain the 15-billion-gallon conventional blending target for 2019, in reality Administrator Pruitt’s ongoing actions will reduce ethanol blending far below 15 billion gallons. This is a missed opportunity to reallocate the 1.5 billion gallons Administrator Pruitt has waived through Small Refinery Exemptions and to restore the 500 million gallon shortfall the D.C. Circuit Court ordered EPA to deal with following the Americans for Clean Energy et al v. EPA lawsuit.
“Administrator Pruitt continues to disregard President Trump’s campaign promise that ‘the EPA should ensure that biofuel blend levels match the statutory level set by Congress under the RFS.’ The 2019 proposed RVOs reinforce our decision to challenge certain Small Refinery Exemptions in Court and to petition EPA to account for lost volumes of renewable fuel resulting from the unprecedented number of retroactive Small Refinery Exemptions granted by the agency.
“The proposal to modestly increase cellulosic and advanced RVOs for 2019 is welcome but EPA’s waivers and exemptions have collapsed RIN prices across-the-board discouraging investment in the production and use of cellulosic and advanced biofuels.
“A strong rural economy depends upon growing the use of renewable fuels. The President needs to direct Administrator Pruitt to discard EPA’s refiner win-at-all-costs mentality and carry out another of his promises to allow E15 and higher blends market access year-round.
The National Biodiesel Board — “We welcome the Administration’s proposal to grow the biodiesel volumes, following two flatlined years. This is a positive signal for our industry and we’re pleased the EPA has acknowledged our ability to produce higher volumes. We’ve consistently demonstrated that we can do much more,” said Kurt Kovarik, vice president of federal affairs at NBB. “The fact remains, though, instability in the RFS program caused by the EPA has done significant damage that can only be rectified for biodiesel through consistent and predictable growth in volumes.”
The EPA proposed the Renewable Volume Obligations (RVO) for the biomass-based diesel category would increase from 2.1 billion gallons in 2019 to 2.43 billion gallons in 2020. The advanced biofuel category, for which biodiesel also qualifies, would also increase slightly from 4.29 billion gallons in 2018 to 4.88 billion gallons in 2019, under the EPA’s proposal.
Iowa RFA — “This is a status quo proposal for ethanol and the status quo is bad,” stated Iowa Renewable Fuels Association (IRFA) Executive Director Monte Shaw. “The ethanol number isn’t worth the paper it’s written on so long as Scott Pruitt is granting small refinery exemptions left and right – even beyond what the Department of Energy recommends. With Pruitt in charge of the EPA, the ethanol number in reality is more like 13.5 billion gallons, which is well below what President Trump promised and what it takes to grow demand. Rural America is already suffering from low commodity prices and tariff wars, and today’s proposal is a missed opportunity to provide good news for consumers and farmers.”
Shaw concluded, “Finally, we will carefully consider EPA’s proposals regarding the transparency of the RIN market. The Commodity Futures Trading Commission (CFTC) has authority to investigate claims of RIN price manipulation. In March of 2016, EPA signed a Memorandum of Understanding with CFTC to investigate and identify any market abuse by RIN traders. It might make sense to disclose more information about the RIN market but we would oppose prohibiting blenders and wholesalers from handling RINs because those parties have used RIN proceeds to reduce pump prices and pay for higher blend infrastructure.”
API — The American Petroleum Institute commended EPA for fair and equitable treatment of the reallocation question on small refinery waivers in the proposed 2019 biofuel obligations under the Renewable Fuel Standard, but said the RFS remains flawed and needs to be reformed.
“EPA made the right call in not reallocating the waived small refiner exemption volumes, however the agency’s latest proposal for 2019 is yet another example – in fact it’s an annual example of a broken government program that needs a comprehensive legislative solution that includes the sunset of the program,” said API Downstream Group Director Frank Macchiarola.
“The RFS is a backward-looking policy that doesn’t reflect today’s energy market realities of strong domestic energy production. Furthermore, by increasing biomass-diesel and the overall biofuels volumes the government is putting its thumb on the scale, picking winners and losers. The biggest losers from this biomass-diesel proposal could be consumers as once again this proposal threatens to breach the blend-wall. The American consumer is demanding real legislative reform of the program and this annual process only strengthens the case for such reform.”
NATSO — NATSO, the national association representing truckstops and travel plazas, today praised the Environmental Protection Agency (EPA) and the Trump Administration for proposing renewable volume obligations under the Renewable Fuel Standard (RFS) that will support continued growth in the advanced biofuels market.
“We thank EPA and the entire administration for hearing and responding to the retail fuel industry’s concerns and proposing ambitious yet achievable renewable fuel obligations. If the United States can continue down this path, while fostering an environment of certainty and transparency, the RFS will continue to function as Congress intended by incentivizing renewable fuel blending while lowering fuel prices for consumers,” said NATSO President and CEO Lisa Mullings.
To further provide certainty for retailers and value to consumers, NATSO and all major associations representing the biodiesel supply chain recently announced that they are now united in their desire to see Congress extend the $1 per gallon biodiesel blender’s tax credit. “The biodiesel tax credit has historically worked in conjunction with the RFS to incentivize growth in the biodiesel industry and lower retail diesel prices, which in turn lowers the prices for all goods that are shipped by truck. NATSO urges Congress to build on the momentum that EPA initiated today by passing a long-term extension of the biodiesel tax credit,” Mullings said (letter here).
SIGMA — Of great importance for SIGMA members, the proposed rule does not appear to revise or otherwise initiate a rulemaking to adjust the RFS regulations in a manner that would make downstream entities – rather than refiners and importers – “obligated parties.” EPA denied petitions to change the point of obligation in November 2017.
Growth Energy — Growth Energy CEO Emily Skor issued the following statement: “The EPA proposed 15 billion gallons for conventional biofuels, but that still isn’t a real number we can count on. This plan fails to ensure those gallons will, in fact, be blended. By neglecting to reallocate gallons lost to waivers, the EPA is doubling down on another year of an estimated 1.5 billion gallons in demand destruction.
“The same holds true for advanced and cellulosic biofuels, which are rapidly delivering new economic opportunities for rural communities and driving America’s leadership in clean energy. The targets proposed today promise growth, but those investments can’t move ahead unless the EPA makes it clear that goals set by Congress will be enforced.
“The proposed RVOs also fail to restore the volumes lost to waivers for 2016, despite a court ruling last July that requires EPA to restore 500 million gallons of biofuel demand. The EPA cannot continue to enrich the largest oil companies and refiners at the expense of struggling U.S. farmers.”
Renewable Fuels Association — “It would seem a hollow and cynical exercise to praise or thank EPA Administrator Pruitt for appearing to follow the statute with this proposed RVO,” said RFA President and CEO Bob Dinneen. “While we acknowledge that the implied 15-billion-gallon requirement for conventional biofuels like corn ethanol should, in theory, send a positive signal to the market, it comes with the backdrop of 1.6 billion gallons of demand destructed by illegal waivers to small refineries and no commitment that EPA is changing its approach to granting these exemptions. Thus, the proposal means nothing until EPA reallocates those lost gallons and sets forth a more transparent and rational process that assures small refinery waivers are not abused or granted unnecessarily. Unfortunately, over the past few days, Administrator Pruitt buckled yet again to pressure from the oil industry and removed language from this proposal that would have indicated the Agency’s interest in addressing what has clearly become an abused process. That’s not just wrong, it flies in the face of the President’s commitment to farmers and consumers across the country who support the increased use of renewable fuels,” according to Dinneen.
