EPA releases proposed 2014, 2015, 2016 RFS volume requirements

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On May 29, the U.S. EPA released a proposed rule containing 2014, 2015 and 2016 renewable volume requirements (RVOs) under the renewable fuel standard (RFS), along with a proposed 2017 RVO for biomass-based diesel ahead of its June 1 judicial deadline. While the proposed RVOs do increase over time, they fall short of statutory requirements.

According to the EPA, the proposed 2014 RVOs reflects the actual amount of domestic biofuel used last year. The cellulosic requirement is set at 33 million gallons, with the biomass-based diesel requirement set at 1.63 billion gallons, the advanced biofuel requirement set at 2.68 billion gallons, and the requirement for total renewable fuel set at 15.93 billion gallons. Statutory requirements for 2014 called for 18.15 billion gallons of renewable fuel, including 1.75 billion gallons of cellulosic biofuels, and 3.37 billion gallons of total advanced biofuels.

The proposed rule calls for the 2015 RVOs to include a cellulosic requirement of 106 million gallons, a biomass-based diesel requirement of 1.7 billion gallons, an advanced biofuel requirement of 2.9 billion gallons and a requirement for total renewable fuel of 16.3 billion gallons. This is far below the statutory requirement of 20.5 billion gallons of total renewable fuel, including 3 billion gallons of cellulosic biofuels and 5.5 billion gallons of total advanced biofuels.

The EPA’s proposal calls for the 2016 RVOs to include 206 million gallons of cellulosic biofuels, along with 1.8 billion gallons of biomass-based diesel, 3.4 billion gallons of advanced biofuel, and 17.40 billion gallons of total renewable fuel. This is also far below the statutory requirement of 22.25 billion gallons of total renewable fuel, including 4.25 billion gallons of cellulosic biofuel and 7.25 billion gallons of total advanced biofuel.

In addition, the proposed rule aims to set the 2017 RVO for biomass-based diesel at 1.9 billion gallons.

“This proposal marks an important step forward in making sure the renewable fuel standard program delivers on the congressional intent to increase biofuel use, lower greenhouse gas emissions and improve energy security,” said Janet McCabe, the acting assistant administrator for EPA’s Office of Air, in a statement. “We believe these proposed volume requirements will provide a strong incentive for continued investment and growth in biofuels.”

According to the EPA, the proposed 2016 RVO for cellulosic biofuel is six times higher than actual 2014 volumes, while the 2016 RVO for total renewable fuel is approximately nine percent higher than actual 2014 volumes. The agency also pointed out the proposed 2016 RVO for advanced biofuel is about 27 percent higher than actual 2014 volumes, with the 2017 biomass-based diesel RVO 17 percent higher than 2014 volumes.

Within a fact sheet, the EPA provided some background information on how it the RVOs in the proposed rule. “Due to constraints in the fuel market to accommodate increasing volumes of ethanol, along with limits on the availability of non-ethanol renewable fuels, the volume targets specified by Congress in the Clean Air Act for 2014, 2015 and 2016 cannot be achieved,” said the EPA in the fact sheet. “However, EPA recognizes that the statutory volume targets were intended to be ambitious; Congress set targets that envisioned growth at a pace that far exceeded historical growth rates. Congress clearly intended the RFS program to incentivize changes that would be unlikely to occur absent the RFS program. Thus while EPA is proposing to use the tools provided by Congress to waive the annual volumes below the statutory levels, we are proposing standards that are directionally consistent with Congress’ clear goal of increasing renewable fuel production and use over time. The proposed volumes would require significant growth in renewable fuel production and use over historical levels. EPA believes the proposed standards to be ambitious but within reach of a responsive marketplace.”

The EPA also explains that there are two different authorities in the statute that permit it to reduce volumes of advanced biofuel and total renewable fuel below volumes specified in the statute. Under the first, when the agency lowers the applicable volume of cellulosic biofuel below the volume specified in the CAA, it also has the authority to reduce applicable volumes of advanced biofuel and total renewable fuel by the same or lesser amount. Under the second, the agency can reduce the applicable volumes of any renewable fuel under the CAA general waiver authority under certain conditions, including where there is ‘inadequate domestic supply.’” According to the EPA, it’s proposed rule uses a combination of these two authorities to reduce volumes of both advanced biofuel and total renewable fuel to address two constraints: limitations in the volume of ethanol that can be consumed given practical constraints on the supply of higher ethanol blends to the vehicles that can use them, and limitations in the ability of the industry to produce sufficient volumes of qualifying renewable fuel, particularly non-ethanol fuels.

The fact sheet also indicates that the proposed RVOs would allow volumes of conventional (non-advanced) renewable fuel of up to 13.25, 13.40 and 14.0 billion gallons to be used to satisfy the total renewable fuel requirements for 2014, 2015 and 2016, respectively. In addition, the agency estimated that under the proposed RVOs, in 2016 about 10 percent of all transportation fuel used would be from renewable resources.

According to the EPA, a hearing on the proposal will be held June 25 in Kansas City, Kansas. A public comment period will be open through July 27. The final rule is subject to a judicial deadline and is expected to be released by Nov. 30.  

Several biofuel trade organizations have weighed in on the proposed rule. The Renewable Fuels Association criticized the EPA for clinging to the “blend wall” methodology that falsely claims ethanol has reached its saturation point at a 10 percent ethanol blend, and that higher-level ethanol blends, such as E15 and E85, are not yet large enough to justify a higher RVO. “EPA has to be given some credit for attempting to get the RFS back on track by increasing the renewable volume obligations (RVOs) over time,” said Bob Dinneen, president and CEO of the RFA. “But the frustrating fact is the agency continues to misunderstand the clear intent of the statute—to drive innovation in both ethanol production and ethanol marketing. The agency has eviscerated the program’s ability to incentivize investments in infrastructure that would break through the blend wall and encourage the commercialization of new technologies. By adopting the oil company narrative regarding the ability of the market to effectively distribute increasing volumes of renewable fuels, rather than putting the RFS back on track, the agency has created its own slower, more costly, and ultimately diminished track for renewable fuels in this country.”

“Today’s announcement represents a step backward for the RFS. EPA successfully enforced a 13.8 billion gallon RVO in 2013,” Dinneen said. “The industry produced 14.3 billion gallons of ethanol last year. There is no reason to promulgate an RVO rule that takes us backward. All it will do is result in an ever-increasing supply of renewable fuel credits (RINs) that will further discourage private sector investment in infrastructure and technology. This doesn’t make sense.”

“The EPA plan fundamentally places the potential growth in renewable fuels in the hands of the oil companies—empowering the incumbent industry to continue to thwart consumer choice at the pump with no fear of consequence for their bad behavior,” Dinneen continued. “That is not what the statute intended. And that is not what’s in the best interests of consumers—who will be denied greater access to the lowest cost liquid transportation fuel and octane source on the planet.”

Michael McAdams, president of the Advanced Biofuels Association, called the proposal a step in the right direction. “The Advanced Biofuels Association looks forward to reviewing the complex, multi-year proposal unveiled today in detail and submitting our official comments on this important regulation,” he said. “We are grateful for the EPA’s good-faith efforts to support this industry, today’s proposal is a step in the right direction and gives more growth potential to advanced and cellulosic biofuels relative to the original proposal. However, we continue to believe that the cellulosic waiver credit and other areas require legislative reform. We look forward to continuing to work with Congress and the administration to reform and strengthen the RFS so it can deliver on the promise of next-generation renewable fuels.”

Tom Buis, CEO of Growth Energy, called the proposals an improvement over EPA’s original 2014 RVO proposal, but noted they still need significant improvement. “We have sincere concerns that these proposed numbers are not moving forward to the degree that Congress had intended for the RFS,” he said.

“It is unfortunate that EPA chose to side with the obligated parties who have deliberately refused to live up to their obligation to provide consumers with a choice of fossil fuels or lower cost, higher performing, homegrown renewable energy at the pump,” Buis said. “Everyone in Congress, as well as all parties in the renewables and oil industry, knew when this legislation was debated and passed into law that the only way the RFS goals could be met was by introducing higher blends into the market moving forward. Now the obligated parties, controlled primarily by Big Oil, have refused to live up to their obligation and the initial read on EPA's proposal is they have simply acquiesced to the demands of Big Oil.”

“One thing that everyone should keep in mind is that this a proposed rule,” Buis stressed. “We will continue to analyze and review these proposals for 2014, 2015 and 2016. Furthermore, Growth Energy will file exhaustive comments with EPA. Just as we successfully commented on the original 2014 RVO proposal by EPA, which ultimately forced EPA to reconsider their initial flawed rule, we are confident that our forthcoming comments will highlight the changes that are necessary to meet the goals of the RFS.”

“The RFS has been our nation’s most successful energy policy in the last 40 years and we must continue to advance a strategy that promotes American jobs, a cleaner environment and energy security by reducing our dependence on foreign oil,” Buis continued.

Brian Jennings, executive vice president of the American Coalition for Ethanol, noted that the EPA is yet again proposing to circumvent the RFS by limiting ethanol use to the amount oil companies are willing to blend with the gasoline they refine, and not one gallon more. “It’s like the NFL saying it’s ok for the New England Patriots to deflate footballs while everyone else must play by the rules,” said Jennings.

“EPA was forced to withdraw their original 2014 proposal because the law doesn’t allow them to use the blend wall to set levels and doing so undermines the integrity of the program.  The good news is that there is still time to get the RFS back on track,” Jennings said.  “We will provide ACE members and biofuel supporters a platform to once again blitz EPA with comments before the final rules are issued on November 30.”

“A dangerous precedent could be set by EPA regarding the Clean Air Act,” Jennings continued.  “If EPA is willing to let oil companies disregard Clean Air Act requirements to clean up motor fuel, how does it expect power plants to comply with their Clean Air Act proposal to curb carbon pollution?”

Joe Jobe, CEO of the National Biodiesel Board, called the proposal a significant step in the right direction. “It is not perfect, but it will get the U.S. biodiesel industry growing again and put people back to work,” he said. “I want to thank Administrator McCarthy and Secretary Vilsack for restoring growth to the program and for their commitment to renewable fuels.”

“Biodiesel has proven that advanced biofuels can do just what we said they would, which is create jobs and strengthen our energy security while significantly cutting harmful pollution from petroleum,” Jobe said. “Biodiesel has displaced more than 8 billion gallons of petroleum diesel in the U.S. over the last decade. That is an incredible achievement, and we will build on that success under the proposal the EPA released today.”

“However, more can be done, and we particularly look forward to working with the administration on strengthening biodiesel volumes for 2016 and 2017 during the comment period in the coming weeks,” Jobe said.

“Biodiesel is one of the most practical, cost-effective means we have for cutting carbon emissions in the transportation sector, and there is no doubt that the industry can exceed the EPA’s proposed volumes in a sustainable way using domestic resources,” Jobe continued, noting that the EPA’s proposal for 2017 is only slightly higher than the actual biodiesel production of 1.8 billion gallons in over the last two years. “It is imperative that we get it right. This is a critical component of President Obama’s pledge to address climate change while also making sure America leads in the development of alternative fuels.”

Brent Erickson, executive vice president of the Biotechnology Industry Organization’s Industrial & Environmental Section, said the proposal will continue to chill investment for advanced biofuels.  “EPA’s delays in the RFS rulemaking have already done significant damage to the advanced biofuel industry,” he said.

“The agency’s 2013 proposal to constrict market access for renewable fuels and its delays in approving pathways for advanced biofuels have chilled investment in the sector,” Erickson said. “We estimate EPA is responsible for a $13.7 billion shortfall in necessary investments for advanced biofuel capacity. EPA shouldn’t scratch its head and wonder why the cellulosic biofuel industry is having increasing difficulty attract capital to build additional new capacity.”

“Additionally, the previous proposed 2014 rule and the delay in finalizing it caused a measureable increase in greenhouse gas emissions,” Erickson said. “While transportation fuel increased from 2013 through 2014, oil companies used proportionally less renewable fuel. The result was 21 million metric tons of added CO2 emissions during the past year – equal to putting 4.4 million more cars on the road.”  

“Today’s overdue re-proposal doesn’t do enough to get the RFS program back on track,” Erickson continued. “The RFS was designed to provide a market floor for biofuels. Instead, EPA has once again proposed to help the oil industry build a regulatory wall to keep advanced biofuels out of the U.S. market.”

Brooke Coleman, executive director of the Advanced Ethanol Council, has also weighed in on the proposal. “The good news is it is clear that EPA and the Obama Administration want to send a signal to the marketplace that domestic renewable fuel markets are going to grow,” he said. “The blending targets are definitely stronger and theoretically create new markets…But Clean Air Act regulations have to have backbone to actually achieve their ambitions, and EPA is still allowing the oil industry’s refusal to comply with the RFS to be cause to slow the program down. If the Obama Administration continues to reward non-compliance with clean energy laws, clean energy laws will cease to be effective.”

“There is a reason that oil champions in Congress tried and failed to get renewable fuel distribution-related waivers written into the law in 2005,” Coleman continued. “Oil companies control distribution and would therefore control the RFS. While this is just a proposal, we still have to convince the Obama Administration to put the backbone back into the law. We do not believe that President Obama wants to be remembered as the president who made a landmark Clean Air Act climate change program voluntary.”

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the proposal gives into Big Oil lies and turns its back on consumers, fuel choice and the environment. “The Obama Administration has no legal authority to reduce the ethanol numbers. For conventional biofuels, this is a path to nowhere,” he said. “The proposed ethanol level for 2016 is less than what we already produced in 2014. This proposal will not crack the petroleum monopoly and will not allow consumers to benefit from the choice of lower-cost E15 and E85. As we’ve done over the past year, we’ll continue to work with all parties to fix this proposal.”

Grant Kimberley, executive director of the Iowa Biodiesel Board, expressed relief over the proposal. “As the top biodiesel-producing state, we are enormously relieved the biodiesel industry’s long limbo is almost over,” he said. “Although the prolonged uncertainty strained our producers, we seem to be headed back on course for the original intent of the RFS.”

“EPA’s proposal marks a significant increase for biodiesel volumes from their original proposal in 2013, which would have held the biodiesel standard flat at 1.28 billion gallons through 2015,” Kimberley continued. “Although the proposed volumes in later years are lower than the reasonable increases we had requested, and we look forward to opportunities for greater growth, these volumes still represent advancement. We are grateful to EPA for hearing us, and adjusting the volumes to promote steady growth in renewable fuel rather than abruptly reversing course. We also appreciate USDA's support in this effort. Further, having four years of known volumes is a huge step towards eliminating the disruptive uncertainty that has made business planning and investments difficult in Iowa. We sincerely hope our industry will not have to endure this under the RFS again.”

Novozymes Americas president Adam Monroe expressed disappointment in the proposal. "Renewable fuels are a huge opportunity for the United States to achieve President Obama’s climate change goals, capture private investment, create jobs and save drivers money,” he said. Today’s proposal undermines all of that.”

“We are disappointed that the agency is allowing Big Oil to maintain an artificial impediment like the so-called blend wall,” Monroe said. “While President Obama is pushing to reduce greenhouse gas emissions in other sectors, he is letting the oil industry attack climate-smart alternative energy.

“The only way the world will use more renewable energy is with bold leadership and bold policy,” Monroe continued. “The EPA's aspiration should not be a slow buildup in renewable fuel volumes, it should be an economy driven by clean technologies, supporting thousands of new jobs and billions in private investment. That all starts with aggressive goals for the RFS.”

Poet CEO Jeff Lautt also criticized the proposal for putting the oil industry’s agenda ahead of farmers and rural America. “While the EPA is correct in recognizing the intent of Congress to continue growth in biofuels, the targets announced today fall well short of rural America’s potential to produce low-cost, clean-burning ethanol,” he said.

“America’s farmers have answered the call laid out in the renewable fuel standard to help wean our nation off of foreign oil,” Lautt continued. “Agriculture has taken incredible strides in recent years, growing yields through efficient farming practices and technology improvements, and we have all reaped the benefits of that labor through greater availability of high-performance, domestically produced ethanol. Rural America has upheld its end of the deal, and I ask that the EPA uphold Washington’s end.