2022: A Cliff for Clean Fuels and the RFS?

The year 2022 looms large over alternative and clean fuel industries participating in the federal renewable fuel standard (RFS). But not for the reason one might initially think.
By David Cox | June 24, 2016

The year 2022 looms large over alternative and clean fuel industries participating in the federal renewable fuel standard (RFS). But not for the reason one might initially think. Every day, fuel procurement, project financing and infrastructure investment decisions are heavily influenced by misinformation. Rumor and myth are embraced over statute and fact. Harmful reports of a 2022 RFS expiration persist.

Remarkably, however, the ominous date that so many have come to fear is easily demystified once the statutory language of the Energy Independence and Security Act of 2007 is unpacked. The RFS is, after all, a product of law. With a vote of Congress and the president’s signature, federal policy was set in motion. And while it grows more complex with each U.S. EPA rulemaking, regulators’ hands are tied to the statute.

The RFS is codified in regulation at 40 CFR Part 80 Subpart M. It is part of the U.S. Clean Air Act, authorized in the Energy Policy Act of 2005, and subsequently amended by the EISA. The programmatic goal is to diversify the fuels and sources of fuel that power our nation. To some, the RFS is a means of reducing dependence on foreign oil. To others, it is a subsidy to ethanol run amuck. But as written, at least from 2014 forward, it is unmistakably America’s single greatest market driver for the development of low-and ultra-low carbon fuels.

The RFS mandates that a percentage of our annual fuel consumption come from renewable fuels, advanced biofuels, and cellulosic biofuels. Gasoline and diesel producers and importers bear the burden of ensuring their share of the fuel meets the annual renewable volume obligation, or RVO.   
It is in the context of the RVO that the rumors about the year 2022 begin. EISA Section 202(a)(2)(B) addresses “Applicable Volumes” for the annual mandate. Clause (i), titled “Calendar Years After 2005,” contains tables that delineate the applicable volume that the renewable fuel (Subsection I), advanced biofuel (Subsection II), and cellulosic biofuel (Subsection III) categories should meet though 2022.

The following text is copied directly from EISA Section 202(a)(2)(B)(i)(III).

(III) CELLULOSIC BIOFUEL.—For the purpose of subparagraph (A), of the volume of advanced biofuel required under Subclause (II), the applicable volume of cellulosic biofuel for the calendar years 2010 through 2022 shall be determined in accordance with the following table: Applicable volume of cellulosic biofuel. Calendar year: (in billions of gallons):

2010 .............................................................................. 0.1
2011 .............................................................................. 0.25
2012 .............................................................................. 0.5
2013 .............................................................................. 1.0
2014 .............................................................................. 1.75
2015 .............................................................................. 3.0
2016 .............................................................................. 4.25
2017 .............................................................................. 5.5
2018 .............................................................................. 7.0
2019 .............................................................................. 8.5
2020 .............................................................................. 10.5
2021 .............................................................................. 13.5
2022 .............................................................................. 16.0

After a cursory review of the tables, somewhere along the way, someone stopped reading and wrongly concluded that because the table ends in 2022, the program must also end in 2022.

However, Clause (ii), titled “Other Calendar Years,” immediately follows Clause (i). It says that “for calendar years after the calendar years specified in the tables,” (i.e., after 2022), the EPA administrator will set applicable volumes using specified criteria, which are thereafter laid out.

(ii) OTHER CALENDAR YEARS. —For the purposes of subparagraph (A), the applicable volumes of each fuel specified in the tables in clause (i) for calendar years after the calendar years specified in the tables shall be determined by the Administrator, in coordination with the Secretary of Energy and the Secretary of Agriculture, based on a review of the implementation of the program during calendar years specified in the tables, and an analysis of—

The accurate conclusion? The RFS continues beyond 2022, without sunset and in perpetuity, unless or until another act of Congress shall intervene.

It is time that we in the alternative and clean fuels industries stop the rumor mill. We must work together to ensure that fuel procurement, project financing and infrastructure investment decisions are made with reliance on the fact of law that the RFS will continue beyond 2022.

Author: David Cox
General Counsel, Renewable Natural Gas Coalition
david@rngcoalition.com
916-588-3033