EPA proposes 2020 RVOs, 2021 RVO for biomass-based diesel

• 
• 

The U.S. EPA has proposed to require 20.04 billion gallons of renewable fuels to be blended into the U.S. fuel supply next year, up from 19.92 billion gallons in 2019, according to a rulemaking released by the agency July 5.

The EPA released its proposed rule to set 2020 renewable volume obligations (RVOs) under the Renewable Fuel Standard and the 2021 RVO for biomass-based diesel on July 5.

The agency has proposed to set the 2020 RVO at 20.04 billion gallons, including 5.04 billion gallons of advanced biofuels, 2.43 billion gallons of biomass-based diesel and 540 million gallons of cellulosic biofuel. The 2020 RVO for biomass-based diesel was set last year at 2.43 billion gallons.

When compared to the 2019 RVOs, the proposal would increase the 2020 RVO for cellulosic biofuel by 120 million gallons. Due to the nested nature of the RFS RVOs, the implied RVOs for advanced biofuel and renewable fuel would remain at 2019 levels.

The rulemaking also proposes to set the 2021 RVO for biomass-based diesel at 2.43 billion gallons, level with the 2020 RVO.

On a percentage basis, the RVO would require biofuels to comprise 10.92 percent of U.S. transportation fuel, including 2.75 percent advanced biofuel, 1.99 percent biomass-based diesel, and 0.29 percent cellulosic biofuel.

In addition to proposing 2020 RVOs and the 2021 RVO for biomass-based diesel, the rulemaking also contains several proposed amendments to RFS program regulations. According to the EPA, the proposed changes include clarification of diesel RVO calculations, pathway petition condition, a biodiesel esterification pathway, distillers corn oil and distillers sorghum oil pathways, and renewable fuel exporter provisions.

The EPA also proposes a number of changes to the RFS regulations as part of the Renewables Enhancement and Growth Support rule, which was proposed in late 2016 and has yet to be finalized. The agency said it is considering whether several of the proposed changes included in the REGs rule could be finalized as part of the 2020 RVO rule. This includes allowing production of biomass-based diesel from separated food waste; flexibilities for renewable fuel blending for military use; heating oil used for cooling; separated food waste plans; RFS facility ownership changes; additional registration deactivation justifications; new renewable identification number (RIN) retirement section; new pathway for co-processing biomass with petroleum to produce cellulosic diesel, jet fuel and heating oil; public access to information; redesignation of renewable fuel of a PTD for non-qualifying uses, and other revisions to the fuel program.

The Renewable Fuels Association issued a statement criticizing the rulemaking for neglecting to prospectively reallocate small refinery exemptions (SREs) and blatantly ignoring a court order to restore improperly waived gallons.

“As long as EPA continues to dole out compliance exemptions to oil refiners without reallocating the lost volume, the agency may as well start referring to the annual RFS levels as ‘renewable volume suggestions’ rather than ‘renewable volume obligations,’” said Geoff Cooper, president and CEO or the RFA. “It is a complete misnomer to call these blending volumes ‘obligations’ when EPA’s small refinery bailouts have essentially transformed the RFS into a voluntary program for nearly one-third of the nation’s oil refineries.”

“Congress gave EPA the direction and tools necessary to ensure that the statutory RFS volumes are enforced, and that includes prospectively reallocating exempted volumes to non-exempt parties, Cooper continued. “Instead, EPA has chosen to continue its demand destruction campaign that has been crippling to both ethanol producers and the farmers who supply our industry. Enough is enough.”

According to the RFA, EPA approved 54 exemptions for 2016 and 2017 and an additional 38 requests for 2018 exemptions are pending. Not a single exemption request has been denied by EPA since 2015. The exemptions effectively lowered the total RFS requirement for 2017 by 1.82 billion gallons and cut the 2016 requirement by nearly 800 million gallons.

Making matters worse, the RFA said EPA’s proposal continues to flout the D.C. Circuit Court’s 2017 order requiring the Agency to restore 500 million gallons of renewable fuel obligations that it inappropriately and illegally waived from the 2016 RVO. Unbelievably, the Agency is proposing to snub the court’s ruling by refusing to restore the 500 million gallons remanded volume.

“EPA’s stubborn refusal to obey a court order to restore lost demand is yet another kick in the teeth to U.S. further demand destruction for renewable fuel producers and farmers already facing the worst market conditions in a generation,” Cooper said. “EPA’s suggestion that following the court’s directive would place an ‘additional burden’ on obligated parties is an insult and an affront to the farmers and ethanol producers who trusted this administration would follow the law. The RFS wasn’t intended to make oil refiners comfortable; it was intended to change the status quo by guaranteeing renewable fuels would have access to a marketplace otherwise closed to competition. Yet, EPA appears to be selling out to oil refiners—again—at the expense of rural America. The court found in favor of renewable fuel producers in 2017 because it was clear our industry had been harmed by EPA’s illegal use of a general waiver—now EPA is doubling down on that harm to the ethanol industry and farmers.”

Cooper said today’s proposal undermines the pledge President Trump made to farmers and renewable fuel producers that his administration would enforce the statutory RFS volumes. “By failing to prospectively reallocate, failing to commit to a more judicious and restrained approach to refinery waivers, and failing to follow a court’s order to restore lost demand, EPA is blatantly undercutting President Trump’s commitment to ethanol, which he restated less than a month ago when he visited the Southwest Iowa Renewable Energy ethanol plant,” he said. “We urge the President to resolve the disconnect between the oval office and EPA and get the RFS back on track.”

Growth Energy slammed the proposed RVOs, criticizing the rulemaking for including no mechanism to offset SRE that are consistently undercutting the federal blending goals, disrespecting the court’s decision on the 2016 RVO, and fairing to approve millions of gallons of current cellulosic biofuel production from kernel fiber technology.

“It’s unconscionable that EPA continues to undermine the president’s commitment to a strong rural America,” said Emily Skor, CEO of Growth Energy. “The 2020 RVOs are a drop in the bucket compared to the demand lost due to a flood of refinery exemptions. Unless EPA restores demand destroyed through secret handouts to oil giants like Exxon and Chevron, these targets offer nothing but another year of lost opportunity and rural hardship.

“Making matters worse, EPA chose to flout the 2017 court ruling requiring the agency to revisit 500 million gallons of biofuel that were inappropriately waived,”Skor added. “Today’s proposal is a slap in the face to the farmers dealing with the toughest years on record.”

The American Coalition for Ethanol also condemned the EPA’s failure to reallocate waived volumes and decision to disregard a federal court’s order to restore improperly waived gallons.  

“While EPA says it is proposing to maintain the 15-billion-gallon conventional biofuel blending target for 2020, refinery exemptions without reallocation of waived volumes have effectively reduced the RFS by more than 2 billion gallons below statutory volumes,” said Brian Jennings, CEO of ACE. “President Trump asked EPA to remedy this issue following his trip to Iowa a few weeks ago and this proposal is a missed opportunity to reallocate the 2.61 billion gallons waived through Small Refinery Exemptions (SREs).

“It’s also a missed opportunity to restore the 500-million-gallon shortfall the D.C. Circuit Court ordered EPA to handle following the Americans for Clean Energy et al v. EPA lawsuit, which recently resigned EPA Assistant Administrator for Air and Radiation William Wehrum told ACE members EPA intended to address in the 2020 proposed rule at our D.C. fly-in in April,” Jennings continued.

“EPA 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,’” he added. “Like the 2019 blending targets, the 2020 proposed RVOs reinforce our challenge to certain SREs in Court and petition for EPA to account for lost volumes of renewable fuel resulting from the unprecedented number of retroactive SREs that continue to be granted by the agency.

 “A strong rural economy depends upon growing the use of renewable fuels,” Jennings said. “We expect the administration to follow through on the promise that EPA and USDA will review the expanded use of refinery waivers and deliver a satisfactory remedy.”

The Coalition for Renewable Natural Gas said the EPA’s proposed cellulosic RVO will fall short of actual 2020 cellulosic biofuel production.  “While EPA’s projection methodology results in a 29.2-percent increase over the prior year that recognizes significant ongoing production growth in renewable natural gas by an industry working to decarbonize our natural gas fuel supply, a 540 million gallon volume falls short of accounting accurately both for volumes waived via small refinery exemptions and for actual real-world RNG production,” said Johannes Escudero, co-founder and CEO of the RNG Coalition.

Renewable compressed natural gas (R-CNG) and renewable liquefied natural gas (R-LNG) accounting for 525 million of the 540 million gallons in 2020, as proposed, represents a 31.4-percent growth rate calculation for RNG under the RFS from April 2018 to March 2019 compared to the same time period the year prior, according to the RNG Coalition.

"We will work diligently with EPA throughout the public comment period toward a final rule later this year that reflects the full growth of the RNG industry and accounts for the impact of expanded small refinery exemptions," Escudero added.

The Biotechnology Innovation Organization also criticized the agency for failing to address SREs. “EPA’s proposal to maintain the volumes of conventional biofuels as well as slightly increase advanced and cellulosic biofuel volumes signals potential growth for the industry but does nothing to address the lost gallons from refinery exemptions. This increase will only exist on paper if the agency does not end its practice of granting unjustified RFS waivers,” said Stephanie Batchelor, vice president of BIO’s industrial and environmental section. “To move our nation closer to securing a renewable fuel future and reduce greenhouse gas emissions, EPA must cease such exemptions while efficiently approving pending pathways and registrations for innovative biofuels and production facilities. BIO looks forward to commenting on the proposal and will continue to engage with EPA to advance policies that enable U.S. biofuels producers to access the market and develop sustainable solutions to our energy challenges.”

The American Biogas Council issued a statement thanking the EPA for the timely release of the proposed RVOs, but said the targets fall short of the volumes that would encourage greater development of the biogas industry.

“Specifically, the proposed 2020 RVO misses the mark in three ways: it does not come close to accounting for the full growth the biogas and RNG industry is experiencing today; it does not reallocate any of the hundreds of millions of gallons that have been eliminated by the flagrant and frequent issuance of hardship waivers; and once again, the RVO misses accounting for the gallons associated with the activation of the renewable electricity pathway that was approved in 2014,” said Patrick Serfass, executive director of the ABC. “In all, the cellulosic biofuel category alone should be at least 1 billion gallons greater than the 540 million gallons proposed—at least 100 million gallons for the biogas to renewable natural gas projects to be developed and come online in 2020, 972 million gallons for the renewable electricity pathway, based on data from the Energy Information Administration and EPA’s own conversion factors, and an unspecified amount of additional gallons to counterbalance the issuance of small refinery exemptions or hardship waivers.

“For our sector of the renewable fuels industry, it is extremely disheartening to see the EPA and Trump Administration continue to take steps that hurt the growth and investment of our homegrown biogas and RNG companies,” Serfass continued. “These draft targets reveal the Administration’s effort to undermine the value of the Renewable Fuel Standard which could bolster the U.S. farming industry at a time when support is needed most. Low commodity prices and the Administration’s trade wars are already hurting rural economies across the country. The continued abuse of the RFS must stop. When the final targets are released this fall, they need to be at least 1 billion gallons larger, recognizing the true growth of the biogas industry, the gallons created by utilization of the renewable electricity pathway, and the gallons lost by the frequent and often indiscriminate granting of small refinery exemptions and hardship waivers.”

A full copy of the pre-publication version of the proposed rule can be downloaded from the EPA website. According to the rulemaking, a public comment period will be open until 30 days after a public hearing on the proposal is held. That agency is expected to announce the date and location of that hearing soon.