EPA considers reductions to 2018, 2019 RVOs

On Sept. 26, the U.S. EPA published a notice of data availability (NODA) concerning potential reductions in renewable volume obligations (RVOs) for 2018 and 2019 under the Renewable Fuel Standard. The potential reductions primarily concern RVOs for biomass-based diesel, but would potentially result in corresponding reductions in RVOs for advanced biofuels and total renewable fuel.

The NODA presents historical data on imports of renewable fuel and several options for how the EPA may consider such data in establishing final RVOs using one or more of the waiver authorities provided by statute. A public comment period is scheduled to be open for 15 days following publication of the NODA in the Federal Register.

The U.S. EPA released its proposed rule to set 2018 RVOs under the RFS in July, along with the 2019 RVO for biomass-based diesel. In its new NODA, the EPA explains that the rulemaking included proposed reductions in statutory volume targets for advanced biofuel and total renewable fuel using the cellulosic waiver authority included in the Clean Air Act. “We proposed using the maximum reduction permitted under the authority (considering the proposed cellulosic volume requirement) to reduce the 2018 volume targets for advanced biofuel and total renewable fuel to 4.24 and 19.24 billion gallons, respectively, in part by placing a greater emphasis on cost considerations than we have in the past,” wrote the EPA in the NODA. The EPA also indicated it requested comments on possible additional reductions in advanced biofuel, with corresponding reductions in total renewable fuel, using the general waiver authority, along with comments on whether EPA should reduce the 2019 RVO for biomass-based diesel below the proposed 2.1 billion gallons. While the proposed rule did not specifically seek comments on a potential reduction in the 2018 RVO for biomass-based diesel, the EPA said that since biomass-based diesel is nested within the advanced biofuel requirement and is the predominant source of advanced biofuel, considerations leading to a reduction of advanced biofuel may also be relevant in reducing the 2018 RVO for biomass-based diesel.

The NODA states that statute provides EPA with the authority to waive a portion of the biomass-based diesel standard if there is significant feedstock disruption or other market circumstances that would make the price of biomass-based diesel increase significantly. The statute would also allow the EPA to make related reductions to the advanced biofuel and total renewable fuel RVOs. The EPA said it is seeking comments on whether it would be appropriate to use this waiver authority to set final RVOs for 2018 and the final 2019 RVO for biomass-based diesel in light of recent developments, including those related to cost and supply of advanced biofuel.

In the NODA, the EPA cites the expiration of the $1 per gallon biodiesel tax credit and a recent preliminary determination by the U.S. Department of Commerce that it would be appropriate to place countervailing duties of 41 percent to 68 percent on imports of biodiesel from Argentina and Indonesia as factors that could impact the cost and supply of advanced biofuels.

The NODA also discusses the possible use of general waiver authority to further reduce the 2018 RVOs. Such waivers must be based on a determination that implementation of the requirement would severely harm the economy or the environment of a state, a region or the U.S., or that there is an inadequate domestic supply. The EPA is seeking comments pertaining to the interpretation of “inadequate domestic supply” under the general waiver authority, along with potential impacts.

In addition, the EPA is seeking comments pertaining to the interpretation of severe economic harm under the general waiver authority. Specifically, the EPA is asking stakeholders to weigh in on “whether there is information indicating that severe economic harm is occurring under current standards or would occur for any volume requirement that could be established in the current rulemaking and, if so, whether or how volumes should be adjusted to address such harm.”

The NODA also addresses a waiver authority that allows the EPA to reduce, for up to 60 days, the annual volume requirement for biomass-based diesel by an appropriate quantity that does not exceed 15 percent if the agency determines that there is a significant renewable feedstock disruption or other market circumstance that would make the price of biomass-based diesel increase significantly. The EPA would also be authorized to reduce applicable volumes of advanced biofuel and total renewable fuel by the same or a lesser volume than the reduction in biomass-based diesel. Multiple 60-day waivers can be issued if the circumstances warranting the initial waiver are continuing. The EPA is seeking comments on how the waiver could be interpreted and implemented in a way that is consistent with the text and goals of the law creating the RFS statute.

Sen. Chuck Grassley, R-Iowa, has spoken out to criticize the EPAs NODA. “It’s outrageous that the EPA would change course and propose a reduction in renewable fuel volumes,” he said. “This seems like a bait-and-switch from the EPA’s prior proposal and from assurances from the President himself and Cabinet secretaries in my office prior to confirmation for their strong support of renewable fuels.  Reducing volumes would undermine domestic renewable fuel production.  That’s contrary to the goal of America first, employing U.S. workers, and improving the U.S. economy.   It’s contrary to the goal of meeting the country’s fuel needs, which is critical to economic growth.  This all gives me a strong suspicion that Big Oil and refineries are prevailing, despite assurances to the contrary.  I plan to press the administration to drop this terrible plan.”

The Renewable Fuels Association has also criticized the EPA’s move. “There is no rationale for further lowering either the 2018 advanced biofuel volume requirement or the total renewable fuel volume,” said Bob Dinneen, president and CEO of the RFA. “As we outlined in our recent public comments to EPA on the proposed 2018 RVO, we see no statutory basis whatsoever for attempting to limit biofuel imports through the use of a general waiver. It is also likely that using RFS waiver authorities in an attempt to limit exports would be perceived as a non-tariff trade barrier, which could run afoul of U.S. obligations under World Trade Organization rules.”

“Additionally, there are a number of avenues outside of EPA’s jurisdiction and outside of the RFS to pursue recourse of biofuel trade barriers and international market distortions,” Dinneen continued. “Congress never intended for RFS waiver authorities to serve as tools for managing trade flows.

“EPA appears to be adopting API’s argument that ‘domestic supply’ somehow means ‘domestic production,’ when this is clearly not the case,” he said. “The domestic supply of biofuels includes both imported and domestically produced biofuel volumes, just as USDA recognizes in its monthly supply-demand estimates that the total domestic supply of corn includes corn imports from other countries.

“Even if EPA acted to reduce the advanced biofuel and total renewable fuel volume requirements, its unlikely those actions would significantly curtail biodiesel imports,” Dinneen said. “Biomass-based and renewable diesel imports are often available to obligated parties at a lower cost than some sources of U.S.-produced product (likely due to subsidization of biodiesel and renewable diesel production by certain exporting nations). Thus, reducing the biomass-based diesel and/or advanced biofuel standard likely would have the effect of shutting marginal U.S.-made product out of the marketplace, rather than curtailing imports.”

“The RFA will formally submit comments for the record, but we don’t see justification for any further reductions to the 2018 RVO proposal,” he continued. “Doing so would only harm U.S. consumers.”

The National Biodiesel Board has also spoken out, calling the EPA’s action disappointing. “EPA’s proposal earlier this summer was inadequate, underestimating the power of domestic biodiesel production and ignoring the intent of the law,” said Doug Whitehead, chief operating officer of the NBB. “This request for comment is even more disappointing. NBB will be working with EPA to demonstrate the industry’s proven success record, continued growth and impacts to American workers who were promised that this administration had their back.”

Growth Energy responded to the NODA, urging the Trump Administration to follow through on RFS support. “For this administration to begin taking steps backward after making so many declarations of support for renewable fuels is alarming, and our industry urges the EPA to move forward, not backward on the RFS,” said Emily Skor, CEO of Growth Energy. “While these are significant reductions, they do not decrease the expected 15 billion gallons of conventional biofuel in the RVO; however, we have significant concerns that this action indicates that the EPA may backpedal on the promise and growth of the RFS.”

“The RFS was passed with the intent to lower our nation’s dependence on foreign oil, keep our air clean, revitalize rural America, and provide consumers with more affordable fuel options at the pump,” Skor continued. “This shows a clear willingness from the EPA to reverse course and abandon the goals and promise of more renewable fuel blending in the RFS.”

A full copy of the NODA can be downloaded from the EPA website.