EPA releases proposed 2019 RFS RVOs, fails to address waivers

By Erin Voegele | June 26, 2018

On June 26, the U.S. EPA released a proposed rule that aims to require 19.88 billion gallons of biofuels to be blended into the U.S. fuel supply in 2019, up from 19.29 billion gallons in 2018. The proposed volume allows for up to 15 billion gallons of corn ethanol.

The rulemaking includes proposed 2019 renewable volume obligations (RVOs) under the Renewable Fuel Standard, along with the 2020 RVO for biomass-based diesel.

Information released by the EPA shows the proposed 19.88 billion gallon RVO for 2019 includes 381 million gallons of cellulosic biofuel, 4.88 billion gallons of advanced biofuel and 2.1 billion gallons of biomass-based diesel. The 2019 RVO for biomass-based diesel was set last year. The proposed 2019 RVOs would allow for up to 15 billion gallons of conventional biofuel to meet the annual blending requirement, most of which is corn ethanol.

When compared to blending obligations finalized for this year, the rulemaking proposes to increase the RVO for cellulosic biofuel from the 288 million gallons in 2018 to 381 million gallons in 2019, an increase of 93 million gallons. The agency has proposed to increase the RVO for advanced biofuel from 4.29 billion gallons in 2018 to 4.88 billion gallons in 2019, an increase of 590 million gallons. The overall RVO for total biofuels would increase from 19.29 in 2018 to 19.88 in 2019 an increase of approximately 590 million gallons. Conventional biofuels, including corn ethanol, can be used to meet a statutory maximum of 15 billion gallons of the 2019 RVO.

The rulemaking also proposes to set the 2020 RVO for biomass-based diesel at 2.43 billion gallons, up 330 million gallons when compared to the 2019 and 2018 RVOs of 2.1 billion gallons.

On a percentage basis, the proposed rule would require total renewable fuel to comprise 10.88 percent of U.S. transportation fuel next year, including 2.67 percent advanced biofuel, 1.72 percent biomass-based diesel and 0.209 percent cellulosic biofuel.

A comment period on the EPA’s proposal is set to open following publication of the proposed rule in the Federal Register. Comments can be filed online at www.Regulations.gov under Docket ID No. EPA-HQ-OAR-2018-0167. The comment period is set to close Aug. 17. The EPA also indicated it will scheduled a public hearing on the proposed rule soon. A pre-publication version of the proposed rule can be downloaded from the agency’s website.

Several representatives of the biofuels industry have spoken out in response to the EPA’s proposed rulemaking, with most criticizing the proposal for failing to address demand destruction caused the by EPA’s recent misuse of its hardship waiver authority.

Growth Energy stressed that the proposed 2019 RVOs can’t undo damage caused by the EPA’s misuse of hardship waivers. "The EPA proposed 15 billion gallons for conventional biofuels, but that still isn’t a real number we can count on,” said Emily Skor, CEO of Growth Energy. 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 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,” Skor continued. “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 Renewable Fuels Association said the proposed 2019 RVOs have dealt another blow to America’s farmers and ethanol producers. “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 Bob Dinneen, president and CEO of the RFA. “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.”

“This RVO proposal is a paean to missed opportunities for the sole purpose of benefiting the oil industry that continues to thwart the development of biofuels at every turn,” Dinneen continued. “The agency missed the opportunity to address the flawed and opaque small refinery waiver process. It failed to address the court-ordered remand of 500 million gallons in forfeited demand from the 2016 RVO. And it once again missed an opportunity to address the disparate treatment of E10 and E15 with regard to volatility regulation. EPA needs to stop tilting to the whims of the oil industry in implementing the nation’s renewable fuel program, and work to create demand for ethanol, lowering prices at the pump for consumers and creating economic opportunities for farmers across the country.”

The Advanced Biofuels Business Council said that regulatory uncertainty will continue until the EPA stops misusing waivers. “On its face, the EPA proposal is promising,” said Brooke Coleman, executive director of the ABBC. “It reverses last year’s roll back of cellulosic biofuels, and it opens growth opportunities for advanced producers who are establishing new revenue streams for rural America. But until there is some check on the EPA’s abuse of waivers, regulatory uncertainty will continue to threaten investments in advanced biofuels.

“The EPA must demonstrate that targets will not be undercut by refinery handouts,” Coleman continued. “At the same time, Administrator Pruitt must take concrete action on the president’s pledge to open new markets for advanced biofuels by lifting seasonal regulations on E15.

“The RFS supports hundreds of thousands of manufacturing jobs, creates new market opportunities for America’s farmers and innovators, and has attracted billions of dollars of investment in first-of-a-kind technologies in the advanced and cellulosic biofuels industry,” Coleman said. “These fuels are poised to drive the next manufacturing wave across America, but promises won’t get us there. We need action.”

The American Coalition for Ethanol called the proposed rule a missed opportunity to reallocate waived biofuel volumes. “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,” said Brian Jennings, CEO of ACE. “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,” Jennings said.

“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,” he continued. “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 Advanced Biofuels Association praised the EPA for increasing the RVOs for advanced biofuel, cellulosic biofuel and biomass-based diesel, but expressed concern over the EPA’s continued use of small refiner hardship waivers. “ABFA is pleased to see that EPA has continued to increase the overall RVO mandates for the RFS program and particularly for the advanced biofuel pool,” said Michael McAdams, president of ABFA. “ABFA is proud to represent several members commercializing new technologies to produce increasing volumes of cellulosic fuels. Additional cellulosic facilities are scheduled to come on line in the near future, and we are pleased to see an RVO that will ensure a market for these new gallons.

“We are also pleased with the continued success of the biodiesel and renewable diesel sectors, as these fuels cumulatively provide the greatest greenhouse gas (GHG) emissions reductions under the RFS program at this time,” McAdams said. “Three of our members are currently building new plants in the United States to produce the drop-in diesel fuels of the future.”

“Despite these increases, we continue to be concerned by the rate at which EPA is granting small refiner exemptions under the RFS program,” McAdams continued. “These exemptions have a net effect of reducing the volume of renewable fuels blended in the United States. ABFA will continue to fight this effort to undermine the RVO.”

The National Biodiesel Board said that the proposed increase to biomass-based diesel and advanced biofuel RVOs sends a hopeful signal to the biodiesel industry, but cautioned that small refiner hardship waivers are having a negative impact on the industry. “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 Biomass Power Association criticized the EPA for failing to process RFS fuel pathways for biomass power. “Despite plainly qualifying as a cellulosic transportation fuel when paired with electric vehicles, EPA has so far failed to process the pathways for biomass power that are before the agency,” said Bob Cleaves, CEO of the BPA.

“Beyond the clear qualifications of biomass power under the RFS, our industry provides innumerable benefits on local, regional and national levels,” Cleaves said. “Our members create renewable power from the unusable parts of agricultural crops and low value wood fibers that are cleared from forests or left over after manufacturing higher value products. We employ Americans in rural areas, support the larger forest products supply chain, and generate tax revenue where it is most needed.”

The Iowa Renewable Fuels Association also criticized the EPA for failing to correct its past waiver use. “This is a status quo proposal for ethanol and the status quo is bad,” said Monte Shaw, executive director of the IRFA. “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.”

“We urge President Trump to direct the EPA to rein in out-of-control small refinery exemptions, to order the reallocation of previous exemptions, to address the 500 million gallons owed to conventional biofuels from the illegal 2016 RFS reduction, and to expedite new advanced biofuel pathway approvals,” Shaw continued. “Rural America needs the RFS to work as intended, and it will if the EPA stops undermining the RFS at every turn.”

The Biotechnology Innovation Organization said the EPA’s decision to increase advanced and cellulosic biofuel targets is helpful, the organization criticized the agency for failing to reallocate displaced gallons caused by hardship waivers. “We welcome EPA’s decision to raise the advanced and cellulosic biofuel volumes in its proposal, which will help propel the industry forward in 2019,” said Brent Erickson, executive vice president of BIO’s Industrial and Environmental Section. “However, the advanced biofuels industry is still suffering the effects of the agency’s decision to arbitrarily limit growth for low carbon biofuels in 2018, by setting a backward looking RFS requirement. The 2019 volumes should be higher, to correct from last year and also spur growth for the coming year.

“EPA’s decision to forgo reallocation of gallons displaced from small refinery waivers at the behest of the petroleum industry is disappointing,” Erickson said. “In order to ensure a favorable and supportive investment climate for advanced and cellulosic biofuel producers, EPA must reallocate the gallons from the small refinery waivers already issued and into the future.

“Finally, the Agency must do more to approve new advanced and cellulosic biofuel technologies and production facilities, such as those that use corn kernel fiber as a feedstock, to adequately account for the potential of new technologies as it sets the final 2019 volumes,” Erickson continued. “A strong policy and regulatory environment is critical to supporting the type of innovation that will help strengthen the biobased economy, create good paying jobs and help revitalize rural economies across the country.”

The Coalition for Renewable Natural Gas said the EPA’s proposal reflects continued growth in the renewable natural gas (RNG) industry. “The EPA’s proposed 2019 cellulosic biofuel RVO of 381 million gallons represents a 32 percent increase over the 2018 level,” said Johannes Escudero, CEO of the RNG Coalition. “We are pleased that the proposal recognizes that the RNG industry is continuing to grow under the RFS program. A 381-million-gallon cellulosic biofuel RVO will provide a policy framework that should allow renewable natural gas (RNG) stakeholders to continue developing, and access the capital necessary to invest in, build and service new RNG production facilities.”