EPA to release supplemental rulemaking to account for future SREs

By Erin Voegele | October 04, 2019

The U.S. EPA on Oct. 4 announced plans to release its much anticipated Renewable Fuel Standard relief package. Few details on the proposal were provided, but the agency said a proposed rule seeking public comment on how and at what levels it should account for future small refinery exemption (SRE) gallons could be issued as soon as next week. Biofuel groups applauded President Trump and the EPA for following through with plans to enact a biofuel relief package.

The agency said it will release a supplemental proposal building off the pending proposed rule to set 2020 renewable volume obligations (RVOs) and the 2021 RVO for biomass-based diesel. That rulemaking was released in July. An initial public comment period closed Aug. 30. An EPA spokesperson said the supplemental proposal will propose and request public comment on expanding biofuel requirements beginning in 2020. “EPA will seek comment on actions to ensure that more than 15 billion gallons of conventional ethanol will be blended into the nation’s fuel supply beginning in 2020 and that the volume obligation for biomass-based diesel is met,” the spokesperson said. “This will include accounting for relief expected to be provided for small refineries. EPA intends to take final action on this front later this year.”

The supplemental proposal is expected to be released within the next week. An EPA spokesperson said the ranges to be included in the supplemental proposal are informed by the last three compliance years and statutory direction provided by Congress. The supplemental proposal is expected to include more specific information.

The EPA spokesperson did confirm that the supplemental proposal aims to account for future SREs only. It will not provide a mechanism to reallocate volumes associated with SREs that have already been issued, including the 31 SREs approved by the EPA last month.

The EPA’s announcement also addressed issues related to E15 and renewable identification number (RIN) market reform. The agency said it will initiate a separate rulemaking to streamline labeling and remove other barriers to the sale of E15. An agency spokesperson also confirmed the EPA will continue to evaluate options for RIN market transparency and reform. In addition, the USDA will seek opportunities through the budget process to consider infrastructure projects to facilitate higher biofuels blends and the Trump Administration will continue to work to address ethanol and biodiesel trade issues.

Several biofuel trade groups and federal lawmakers have issued statements applauding the EPA’s announcement.

The American Coalition for Ethanol thanked rural leaders for speaking out on the RFS and urged continued vigilance.

“Because this plan is short on details and the final outcome is dependent upon a new rulemaking process, it’s unrealistic and premature for me to conclusively praise it at this stage,” said Brian Jennings,  CEO of ACE. Instead, my sober assessment of the good and bad in this plan, based on the few details we currently have to work with, is as follows:

“It’s good the President is directing EPA to account for future small refinery exemptions (SREs) beginning in 2020 to ensure more than 15 billion gallons is blended under the RFS next year,” Jennings said. “We are grateful for this step in the right direction, but it isn’t a special deal, it is the White House finally directing EPA to follow the law. We will carefully examine how EPA proposes to offset future SREs in the supplemental rulemaking and will submit comments to shape an outcome to get the RFS back on track starting with the 2020 renewable volume obligation (RVO). Of course, this implies EPA will continue issuing SREs in the future, likely following the recent pattern whereby an average of 30 small refineries were allowed to escape blending obligations. The difference is hopefully those blending obligations will be reallocated to non-exempt refiners going forward as required by law.

“Speaking of reallocation, it’s bad that the Trump Administration is doing nothing to reallocate the more than 4 billion gallons of RFS blending obligations waived for refineries from the 2016, 2017 and 2018 compliance years,” Jennings continued. “These 85 waivers combined with the trade war and weather-related disasters have taken a terrible economic toll on rural America. It’s unfortunate our only remaining remedy is our joint litigation in the DC Circuit Court. It’s also disappointing the plan appears silent on whether EPA will finally restore 500 million gallons to the RFS as ordered by the DC Circuit Court. Our comments to the supplemental 2020 RVO rulemaking will encourage EPA to comply with the court order.

“Most importantly, I want to thank the farmers, biofuel producers, and elected leaders for speaking out about the need for the Trump Administration to reverse the damage done through EPA’s abuse of the SRE provision of the RFS,” he continued. “Your vigilance and grassroots leadership will be necessary to help achieve a positive outcome in the upcoming rulemaking process.”

The Coalition for Renewable Natural Gas said while details of the RFS deal have not been released, the statements issued by EPA and USDA provides hope of a resolution to months of market imbalance. “We are encouraged by the progress and look forward to continued engagement with EPA, USDA and President Trump to ensure the 2020 RVO contains the common-sense reform and restoration of stability that will enable the continued growth of America’s renewable natural gas industry,” said Johannes Escudero, CEO of the RNG Coalition.

The Renewable Fuels Association called the administration’s renewable fuels plan a crucial step forward.

“We thank President Trump for hearing the concerns of ethanol producers, farmers and consumers across the country,” said Geoff Cooper, president and CEO of the RFA. “The plan announced today takes a crucial step toward repairing the damage done by EPA’s small refinery waivers and re-establishes the RFS as a driver of growth in the production and use of low carbon renewable fuels. Once finalized and implemented, this plan will ensure EPA follows the law in setting annual biofuel blending obligations under the RFS.

“President Trump’s action today not only begins to restore integrity to the RFS, but also starts to revive hope for farmers and ethanol plant workers who have seen small refinery exemptions wreak havoc on their markets and destabilize their rural communities,” he continued.

“It is important to remember that today’s announcement marks the beginning—not the end—of an EPA regulatory process, and much work remains to be done,” Cooper said. “We will continue to diligently work with EPA and the administration to ensure this action is finalized in a way that guarantees a 15-billion-gallon requirement in 2020 truly is a 15-billion-gallon requirement.”

Growth Energy commended the plan and said it will uphold the integrity of the RFS.  “It’s been a long process, but when the chips were down, President Trump delivered for farm families and biofuel producers,” said Emily Skor, CEO of Growth Energy. “This is a victory for rural America, and we are grateful to our champions in Congress, USDA Secretary Perdue, and governors across the heartland who fought to put homegrown energy back on the market. We also thank President Trump for hearing the voices of farmers and biofuel producers and his commitment to finding a solution that will make an immediate difference for rural families.

"By accurately accounting for lost gallons from this point forward based on a 3-year average of all exempted gallons, beginning with the 2020 biofuel targets, and breaking down regulatory and infrastructure barriers to higher biofuel blends, we will be able to realize the true potential of the opportunities President Trump opened by approving year-round sales of E15,” Skor continued. “Our industry and farm suppliers are eager to put this plan in place and deliver more lower-cost, lower-carbon biofuels to American consumers. We look forward to finalizing this rule to help America's farmers.”

The Biotechnology Innovation Organization said the RFS proposal will drive investment in advanced biofuel research and development. “This proposal provides much-needed certainty to the Renewable Fuel Standard—a policy that biofuel producers rely on to drive investment in low carbon energy solutions that will address climate challenges, enhance energy security and support rural economies,” said Stephanie Batchelor, vice president of BIO’s industrial and environmental section.

The Advanced Biofuels Association called the EPA’s announcement a step in the right direction. "The Advanced Biofuels Association (ABFA) has always maintained that it was unlawful for the Environmental Protection Agency to use small refinery exemptions (SREs) to lower the price of Renewable Identification Numbers (RINs) under the Renewable Fuel Standard,” said Michael McAdams, president of the ABFA. “ABFA appreciates the administration's efforts to grant relief from the damaging impact of these waivers, which have caused significant economic harm to stakeholders throughout the biofuels industry. This is a step in the right direction, which will help to restore the market demand for these lower carbon fuels."

The National Biodiesel Board said the proposal will restore the integrity of the RFS. "Proper accounting of the exemptions is vital to ensure that the annual RFS volumes send a reliable signal to biodiesel producers, who are making investments and plans for the future,” said Kurt Kovarik, vice president of federal affairs at NBB. “The biodiesel industry relies on the RFS program to support continued growth and market development. While today's proposal addresses the lost gallons from future exemptions, it does not provide for additional volumes of biomass-based diesel in 2021. We will continue to press EPA to send signals for future growth for biodiesel producers and soybean farmers.”

Sen. Chuck Grassley, R-Iowa, said President Trump listened to the concerns of farmers and biofuel producers and delivered on their behalf. “The president listened to all points of view and delivered,” he said. “Small refineries can still apply for waivers while biofuels are able to blend the legally-required amount.

“This plan will fix EPA’s exemption process and help farmers and biofuels producers going forward,” Grassley continued. “The solution outlined by President Trump, Administrator Wheeler and Secretary Perdue is exactly how the RFS is meant to function according to the law as written by Congress. The RFS has a built-in mechanism to make up for waived volumes in advance and EPA will be implementing the law as intended.”

Sen. Joni Ernst, R-Iowa, called the RFS announcement grate news for Iowa and rural America. “The RFS is essential to the livelihoods of folks across our state, which is why I’ve been fighting tirelessly on behalf of Iowa’s farmers and producers every step of the way and making Iowans’ voices heard throughout this process,” she said. “Our message was clear: uphold the RFS—15 billion means 15 billion. 

“The president heard that message and has acted on it,” Ernst continued. “The steps outlined today by the administration will help increase demand for our biofuels, provide certainty for farmers and producers for years to come, and ensure that EPA is implementing the RFS as it was written.” 

Ethanol producer Poet said it applauds Trump for blocking corrupt oil tactics. “President Trump’s announcement today has reaffirmed his commitment to farmers and rural communities and marks a great victory in the Renewable Revolution,” Poet said in a statement. “The President’s actions will restore integrity to the RFS—starting with the 2020 RVO levels—and help pave the way for the rollout of E15, creating a huge win for farmers, biofuel producers, and consumers alike.  Millions of Americans will see greater savings at the pump and have the freedom to choose climate-friendly, American-made E15, while our nation’s farmers will see increased demand for their grain at a critical time.

The Iowa Renewable Fuels Association said the proposal will put the RFS back on track. “Iowans thank President Trump for again listening to their concerns and calls for the Renewable Fuel Standard (RFS) to be enforced according to the law,” said Monte Shaw, executive director of the IRFA. “The economic devastation wrought by the unjustified use of refinery exemptions must be stopped. We welcome the proposal to restore integrity to the RFS by prospectively accounting for those exemptions using a three-year rolling average of actual refinery exemptions granted. We will work with our champions and the White House to make sure the EPA’s final rules ensure that a 15 billion-gallon RFS will actually be a 15 billion-gallon RFS. If that is accomplished, the integrity of the RFS will have been restored and President Trump’s promise to protect and uphold the RFS will have been redeemed.

The National Corn Growers Association said the proposal will restore integrity to the RFS.  “The President is finally telling the EPA that enough is enough, they must follow the law, and we appreciate that,” said Kevin Ross, president of the NCGA. “NCGA is thankful to our elected Senators, Representatives, Governors and other state lawmakers who consistently pressed the Administration to find a real solution to the harm caused by refinery waivers. A special thanks to USDA Secretary Perdue who continues to be an outspoken advocate on this issue and for farmers. We stand ready to work with them to ensure these commitments are finalized.”