EPA releases proposed rule to set 2017 RFS RVOs

By Erin Voegele | May 18, 2016

On May 18, the U.S. EPA released a proposed rule to set 2017 renewable volume obligations (RVOs) under the renewable fuel standard (RFS), along with 2018 RVOs for biomass-based diesel.

The agency has proposed to set the 2017 RVO for cellulosic biofuel at 312 million gallons, with the advanced biofuel RVO at 4 billion gallons and the RVO for total renewable fuel at 18.8 billion gallons. The 2018 RVO for biomass-based diesel has been proposed at 2.1 billion gallons.

In a statement, the EPA indicated that advanced biofuels, which much achieve a 50 percent reduction of life cycle carbon emissions when compared to a gasoline baseline, would grow by nearly 400 gallons from 2016 to 2017. The proposed standards would also increase cellulosic biofuel, which must achieve a 60 percent emissions reduction, by 82 million gallons or 35 percent from 2016 to 2017. A previous EPA rulemaking has already finalized the 2017 RVO for biomass-based diesel at 2 billion gallons. Under the proposed rulemaking, conventional biofuels, which must achieve a 20 percent carbon emission reduction, would increase by 300 million gallons between 2016 and 2017, meeting 99 percent of the statutory target of 15 billion gallons. This would allow for approximately 14.8 billion gallons of conventional renewable fuels, such as corn ethanol, to comply with the 2017 standard. Overall, the proposed RVO levels would allow total renewable fuel volumes to increase by nearly 700 million gallons between 2016 and 2017. Finally, biomass-based diesel, which must achieve a 50 percent emissions reduction level, would grow by 100 million gallons between 2017 and 2018.

The proposed percentage standards call for renewable fuel to comprise 10.44 percent of the transportation fuel pool next year. The cellulosic standard would be 0.173 percent, with the biomass-based diesel standard at 1.67 percent, and the advanced biofuel standard at 2.22 percent.

Under RFS statute, Congress set the 2017 RVOs at 5.5 billion gallons for cellulosic biofuels, more than or equal to 1 billion gallons for biomass-based diesel, 9 billion gallons for advanced biofuel, and 24 billion gallons for total renewable fuel.

“The renewable fuel standards program is a success story that has driven biofuel production and use in the U.S. to levels higher than any other nation,” said Janet McCabe, acting assistant administrator for EPA’s Office of Air and Radiation. “This administration is committed to keeping the RFS program on track, spurring continued growth in biofuel production and use, and achieving the climate and energy independence benefits that Congress envisioned from this program.”

Within a prepublication version of the proposed rule, the EPA stated it used both the cellulosic waiver authority and the general waiver authority to reduce volume obligations from statutory levels using the same fundamental reasoning it used in its final rule setting RVO levels for 2014, 2015 and 2016.

“Despite significant increases in renewable fuel use in the United States, real-world constraints, such as the slower than expected development of the cellulosic biofuel industry and constraints in the marketplace needed to supply certain biofuels to consumers, have made the timeline laid out by Congress impossible to achieve,” said the EPA in the proposed rule. “These challenges remain, even as we recognize the success of the RFS program over the past decade in boosting renewable fuel use, and the recent signs of progress towards development of increasing volumes of advanced, low GHG-emitting fuels, including cellulosic biofuels.”

“We believe that the RFS program can and will drive renewable fuel use, and we have considered the ability of the market to respond to the standards we set when we assessed the amount of renewable fuel that can be supplied,” the EPA continued. “Therefore, while this proposed rule applies the tools Congress provided to make adjustments to the statutory volume targets in recognition of the constraints that exist today, we believe the standards we are proposing will drive growth in renewable fuels, particularly advanced biofuels, which achieve the lowest lifecycle GHG emissions. In our view, while Congress recognized that supply challenges may exist as evidenced by the waiver provisions, it did not intend growth in the renewable fuels market to be stopped by those challenges, including those associated with the ‘E10 blendwall.’ The fact that Congress chose to mandate increasing and substantial amounts of renewable fuel clearly signals that it intended the RFS program to create incentives to increase renewable fuel supplies and overcome constraints in the market. The standards we are proposing would provide those incentives.”

The EPA is scheduled to hold a public hearing on the RFS proposal June 9 in Kansas City, Missouri. A public comment period will be open through July 11. A full copy of the proposed rule can be downloaded from the EPA website

The Biotechnology Innovation Organization said the proposed rule fails to put the program fully back on track and continues to create uncertainty for advanced and cellulosic biofuel producers. “BIO’s member companies have invested billions of dollars to develop advanced and cellulosic biofuel technologies and bring first-of-a-kind, large-scale biorefineries on line,” said Brent Erickson, executive vice president of BIO’s Industrial and Environmental Section. “The biofuel industry and fuel retailers are now investing billions more to continue building the infrastructure needed to get these fuels into the market.”

“We look forward to reviewing the proposed rule carefully and to submitting considered comments on the rule,” Erickson continued. “However, we are concerned that today’s rule fails to recognize and support the industry’s commitment and capacity to reach the statutory volumes for advanced and cellulosic biofuels under the RFS program and to continue to grow in the future. While we appreciate EPA slightly increasing the volume requirements, the rule nevertheless relies on a flawed interpretation of EPA’s waiver authority that is inconsistent with the plain text of the Clean Air Act as well as with congressional intent and is currently the subject of litigation in the D.C. Circuit Court. As BIO has explained in past comments to the agency, EPA cannot rely on such an interpretation of the statute to expand its authority and rewrite the rules governing the congressionally established volume requirements. We are concerned that EPA is repeating this and other errors from EPA’s untimely final rule for the 2014, 2015 and 2016 RFS volumes, issued late last year.

“We also appreciate and commend the agency’s effort to issue the 2017 rule in a timely manner; unfortunately, however, we are concerned that the rule continues to send the wrong signal to biofuel producers,” Erickson said. “BIO looks forward to working with EPA to correct any problems and flaws in the proposal and get this successful program back on track.”

The Renewable Fuels Association has spoken out in response to the EPA’s proposal, stating the rule relies on an illegal interpretation of waiver authority. “For months, EPA has been saying it plans to put the program ‘back on track,’” said Bob Dinneen, president and CEO of the RFA. “Today’s proposal fails to do that. The agency continues to cater to the oil industry by relying upon an illegal interpretation of its waiver authority and concern over a blend wall that the oil industry itself is creating. As a consequence, consumers are being denied higher octane, lower cost renewable fuels. Investments in new technology and advanced biofuels will continue to languish and greenhouse gas emissions from automobiles will be unnecessarily higher.”

“The real frustration is that EPA seems to be artificially constraining this market,” Dinneen continued. “The RFA has demonstrated just how easy it would be for obligated parties to reach the 15 billion gallon statutory volume for conventional biofuels next year. The fact is with rising gasoline demand, increased E15 and E85 use made possible by USDA’s infrastructure grant program, continued use of renewable diesel and conventional biodiesel that also generate D6 RINs (renewable identification numbers), well more than 15 billion gallons will be used next year. All of that is in addition to the 2 billion surplus RINs available to refiners due to EPA’s tepid enforcement of the RFS in the past.”

“EPA can be given credit for two things—getting the proposal out in a timely fashion and at least coming within a mere 200 million gallons of the statutory level of 15 billion gallons for conventional biofuels,” Dinneen said. “As this process continues, we intend to work to encourage a final rule that truly puts the RFS ‘back on track.’ As it is, today’s proposal is a lost opportunity for this administration to cement its legacy in clean fuels, advanced biofuel and climate change.”

Growth Energy said the proposal does move the RFS forward, but stressed improvement is still needed. “We are encouraged that the EPA proposal takes a step forward, signaling the critical importance of cleaner burning, less expensive biofuels, like ethanol,” said Emily Skor, CEO of Growth Energy. “However it still falls short of the goals of the renewable fuel standard. Ethanol producers, retailers and the current auto fleet are fully capable of providing consumers with a true choice at the pump.”

“The renewable fuel standard is our country’s most successful climate and energy policy,” Skor continued. “It continues to inject much needed competition and consumer choice into the vehicle fuels marketplace. It enables greater consumer use of cleaner biofuels that displace toxic emissions and reduce our carbon footprint, while creating American jobs, revitalizing rural America and lowering the price at the pump.”

“Growth Energy is reviewing this proposal and will actively encourage our members and consumers to engage throughout the public comment period,” Skor said. “The administration invested $100 million in biofuels infrastructure this past year and we look forward to working with EPA and the administration to finalize a rule with higher renewable fuel levels to ensure an open and fair fuel marketplace.”

The American Coalition for Ethanol stressed the EPA should increase 2017 RFS blend levels, as gasoline use is set to reach record highs this year. “A top excuse EPA has used to rein-in the RFS is data from the U.S. Energy Information Administration which indicate falling gasoline consumption,” said Brian Jennings, executive vice president of ACE. “EPA has claimed they can’t require oil companies to add more ethanol to a shrinking gasoline pool because of the so-called E10 blend wall. Under that logic, EPA’s ethanol blending volumes for 2017 should increase to statutory levels because gasoline use is on a steady rise and will set a new record this year.”

“While we are pleased that EPA’s 2017 proposal increases ethanol blending levels from 2016, we remain disappointed that EPA falls back on the questionable E10 blend wall methodology which has disrupted implementation of the RFS for more than a year,” Jennings continued. “Our priority is to ensure EPA holds oil companies legally responsible under the RFS for making cleaner and less expensive fuel choices, such as E15 and flex fuels, available to consumers. We will provide ACE members with a platform to once again submit comments to EPA so we can work to improve upon this proposal in advance of the final rule which will be issued on November 30.”

The Iowa Renewable Fuels Association called the proposal a missed opportunity. “Today’s proposal represents yet another missed opportunity for consumers, energy security and rural America,” said Monte Shaw, executive director of the IRFA. “While we’re pleased with the timing of the announcement, getting the RFS back on track should mean more than meeting calendar deadlines with numbers that simply memorialize what is already happening in the fuel market. It should mean getting the RFS back to pushing against the entrenched petroleum monopoly and increasing consumer access to cleaner-burning, homegrown renewable fuels.”

“The proposed corn-based ethanol level for 2017 is just below what was already produced in 2015, and it doesn’t match the current reality of the nation’s fuel sector,” Shaw continued. “Low fuel prices have spurred increased driving habits, the USDA is projecting a historic excess supply of corn, and the number of stations offering fuel blends above E10 will dramatically increase this year through the USDA’s Biofuels Infrastructure Partnership. All of these signs direct the agency to stick to 15 billion gallons for corn-based ethanol, as prescribed by Congress.”

The National Biodiesel Board has spoken out to encourage the EPA to strengthen the RFS proposal. “We appreciate the EPA’s timeliness in releasing these volumes and its support for growing biodiesel use under the RFS, but this proposal significantly understates the amount of biodiesel this industry can sustainably deliver to the market,” Anne Steckel, vice president of federal affairs at the NBB. “We have plenty of feedstock and production capacity to exceed 2.5 billion gallons today, and can certainly do so in 2018.”

 “We have made tremendous progress in cleaning up vehicle emissions but the fact remains that petroleum still accounts for about 90 percent of our transportation fuel,” Steckel added. “This is dangerous and unsustainable, and the RFS is the most effective policy we have for changing it.”

“Biodiesel specifically is the most successful advanced biofuel under the RFS,” Steckel said. “It is proving that advanced biofuels work. But we need meaningful RFS growth to continue making a real dent in our oil dependence and to continue driving investment. On the heels of the Paris climate accord, this is not the time for a piecemeal approach. We need bold action.”