EPA Releases Proposed RVOs and More; Industry Reaction Inside

Below is the Tuesday afternoon release from the EPA on proposed Renewable Volume Obligations (RVOs) and more. This story is developing, stay tuned for more along with more industry reaction.

WASHINGTON (Dec. 7, 2021) — Today, to strengthen the role of the Renewable Fuel Standard (RFS) in advancing greater use of low-carbon renewable fuels, the Environmental Protection Agency (EPA) proposed a package of actions setting biofuels volumes for years 2022, 2021, and 2020, and introducing regulatory changes intended to enhance the program’s objectives. In addition, EPA is seeking public comment on a proposed decision to deny petitions to exempt small refineries from their obligations under the RFS on the grounds that petitioners failed to show that EPA has a basis under the Clean Air Act (CAA) and recent federal case law to approve them. Together, these actions reflect the Biden Administration’s commitment to reset and strengthen the RFS program following years of mismanagement by the previous administration and disruptions to the fuels market stemming from the COVID-19 pandemic.

“Despite multiple challenging dynamics affecting the RFS program in recent years, EPA remains committed to the growth of biofuels in America as a critical strategy to secure a clean, zero-carbon energy future,” said EPA Administrator Michael S. Regan. “This package of actions will enable us to get the RFS program back in growth mode by setting ambitious levels for 2022, and by reinforcing the foundation of the program so that it’s rooted in science and the law.”

For 2022, EPA is proposing the highest total volumes in history, putting the program on a stable trajectory that provides for significant growth. The proposed volumes for 2022 are over 3.5 billion gallons higher than the volume of renewable fuel used in 2020. The proposed volume of advanced biofuel for 2022 is over 1 billion gallons greater than the volume used in 2020. EPA is also proposing to add a 250-million-gallon “supplemental obligation” to the volumes proposed for 2022 and stating its intent to add another 250 million gallons in 2023. This would address the remand of the 2014-2016 annual rule by the DC Circuit Court of Appeals in Americans for Clean Energy v. EPA. Spreading this obligation over two years would provide the market time to respond to this supplemental obligation. The last Administration failed to act on the Agency’s outstanding obligation to address the court’s remand.

EPA is proposing 2021 volumes at the level that it projects the market will use by the end of the year. EPA is proposing to revise the 2020 standards to account for challenges the program and the market faced that year, including from the COVID-19 pandemic.

Proposed Volume Requirements for 2020-2022 (billion gallons)

^{*All values are ethanol-equivalent on an energy consult basis, except for BBD which is biodiesel-equivalent} 

To promote efficiency and opportunity in producing biofuels, this action also proposes a regulatory framework to allow biointermediates to be included in the RFS program, while ensuring environmental and programmatic safeguards are in place. Biointermediates are feedstocks that have been partially converted at one facility but are then sent to a separate facility for final processing into an RFS-qualified biofuel.  Providing a way for producers to utilize biointermediates could reduce biofuel production costs in some cases, and potentially expand opportunities for more cost-effective biomass-based diesel, and advanced, and cellulosic biofuels.

Small Refinery Exemptions
Today’s proposed action denying 65 pending applications for small refinery exemptions (SREs) responds to the decision from the U.S. Court of Appeals for the Tenth Circuit in Renewable Fuels Association et al. v. EPA. This decision, issued in 2020, narrowed the situations in which EPA can grant SREs. EPA is sharing a proposed adjudication of pending SRE petitions that presents EPA’s approach in applying the direction from the Court. The proposed decision document articulates the Agency’s updated interpretation of its CAA statutory authority to grant SREs, and our analysis of the available data on RFS costs and market dynamics that compel the proposed denial.

Because today’s proposed SRE action is highly consequential to impacted parties, reflects an updated interpretation of the CAA, and is a change from previous EPA practice, we are implementing a public notice-and-comment process and seeking input from stakeholders, the public, and from individual petitioning refineries. We encourage all interested parties to share information, data, and legal interpretations.

USDA ActionsSimultaneous with EPA’s announcement today, the U.S. Department of Agriculture (USDA) is announcing $800 million to support biofuel producers and infrastructure.  This includes up to $700 million to provide economic relief to biofuel producers and restore renewable fuel markets affected by the pandemic. In the coming months, the Department will also make an additional $100 million available to increase significantly the sales and use of higher blends of bioethanol and biodiesel by expanding the infrastructure for renewable fuels derived from U.S. agricultural products.  Each agency’s actions align with President Biden’s commitment to promoting and advancing biofuels to help rural America and our nation’s farmers, and to honor the leadership role American agriculture plays in our fight against climate change.

Background

The Clean Air Act requires EPA to set annual RFS volumes of biofuels that must be used for transportation fuel for four categories of biofuels: total, advanced, cellulosic, and biomass-based diesel. EPA implements the RFS program in consultation with the U.S. Department of Agriculture, the U.S. Department of Energy, and consistent with direction from Congress.

For more information on the proposed volume requirements, please visit: https://www.epa.gov/renewable-fuel-standard-program/proposed-volume-standards-2020-2021-and-2022

For more information on the small refinery exemption proposed decision, please visit: https://www.epa.gov/renewable-fuel-standard-program/proposal-deny-petitions-small-refinery-exemptions

INDUSTRY REACTION BELOW:

Quote from Brooke Coleman, Executive Director of the Advanced Biofuels Business Council (ABBC):

“President Biden ran on a promise to stand up to the oil industry and protect jobs in the U.S. biofuel industry. This proposal signals a possible end to the era of oil refinery waiver abuse, an embrace of new fuels, and biofuel market growth in 2022 — clear steps in the right direction. But if we’re going to unleash the full potential of the RFS, the retroactive cuts need to stop. It’s time to make a clean break from the same, old political games we see every year from refiners betting against clean energy and focus on creating a new wave of clean energy jobs across America’s heartland.” (Link to ABBC)

Quote from Chris Edgington, Iowa farmer and President of the National Corn Growers Association (NCGA):
“Because low-carbon ethanol replaces high-carbon gasoline and cuts emissions from vehicles, the proposed volumes for 2022 would help the Biden administration meet emission reduction commitments and lower fuel prices. Denying pending refinery exemption petitions and restoring gallons improperly waived in the past are important steps toward restoring RFS integrity. These actions help move renewable fuels forward. However, reopening 2020 volumes is unprecedented and rewards the use of more oil at the expense of the environment. We strongly urge EPA to move forward with finalizing the strong 2022 volumes while correcting course on the proposed retroactive cuts.”  (Link to NCGA newsroom)

Quote from Emily Skor, CEO of Growth Energy:
“EPA’s projection of strong biofuel blending requirements in 2022, commitment to halt illegal refinery exemptions, and long-awaited progress toward complying with a 2017 court order on lost gallons represent a welcome step forward. These forward-looking plans underscore the critical role biofuels play in mitigating climate change and lowering prices at the pump. However, we are extremely disappointed EPA has proposed rolling back requirements for 2020 and lowering volumes for 2021. Retroactive cuts to 2020 blending requirements impact the entire fuel supply chain, including the farmers, producers, blenders, retailers, and responsible refiners who based business decisions on final requirements in place for some time. This unprecedented move not only exceeds EPA’s legal authority under the RFS, it fails to recognize the law’s built-in mechanism that adjusts requirements when fuel demand differs from original projections. At face value, the EPA’s plan for 2020 gallons serves as a giveaway to petroleum companies at the expense of rural families and future investment in low-carbon energy. On the campaign trail, President Biden committed to strengthening the rural economy and addressing climate change with a strong RFS and we hope to see the president’s promises fully reflected in the final rule. We look forward to engaging with the EPA during the comment period to get the RFS fully back on track. The Biden Administration simply cannot meet its climate goals while retroactively rolling back low-carbon biofuel blending requirements to help oil refiners.” (Link to Growth Energy newsroom)

Quote from Geoff Cooper, President and CEO of the Renewable Fuels Association (RFA):
“Over the past four years, RFA has led the charge to stop the previous EPA’s illegal abuse of the small refinery waiver provision. We commend EPA Administrator Michael Regan and the Biden administration for denying all pending small refinery exemptions, and we are extremely pleased to see the Agency shutting the floodgates on these destructive waivers. … Unfortunately, today’s package also seeks to cut the 2021 conventional renewable fuel requirement to just 13.32 bg, representing EPA’s view of actual consumption. In addition, EPA is proposing to reopen the already-finalized 2020 RVO and reduce the requirement from the original volume of 15 bg to just 12.5 bg, again reflecting EPA’s estimate of actual consumption. While we are pleased to see that EPA’s proposal for 2022 is consistent with Congressional intent to require 15 billion gallons of conventional renewable fuels like corn ethanol, it would be completely unprecedented—and contrary to EPA’s past policies and practices—for the agency to go back in time and revise the 2020 RFS requirements. The 2020 volumes were finalized nearly two years ago. Revising them now would undermine investment, create uncertainty, and go against EPA’s long-standing position that it does not have the authority to change RVOs once they are finalized. We recognize that the previous administration left the RFS program in total disarray when it departed Washington, and today’s package from EPA marks an important step toward finally putting the RFS back on track. However, today’s proposals do not quite get us all the way there, and more work is needed to ensure the RFS drives maximum growth in the production and use of low-carbon renewable fuels.”  (Link to RFA newsroom)

Quote from Kurt Kovarik, Vice President of Federal Affairs at the National Biodiesel Board (NBB):
“During the past two years’ economic challenges, our industry worked hard to meet growing U.S. demand for cleaner, better fuels. We are confident that we can continue to grow and innovate to meet additional market needs. EPA’s rule provides some growth for advanced biofuels in 2022 and we hope puts an end to the demand destruction that resulted from unwarranted small refinery exemptions. We look forward to working with the agency to getting the RFS back on track. And we greatly appreciate the economic relief and incentives for infrastructure that USDA is announcing. … The long delay in setting 2021 volumes is a missed opportunity. Moreover, EPA is setting a bad precedent by recalculating the 2020 obligations. The retroactive lowering of volumes creates uncertainty about future growth.” (Link to NBB newsroom)

NBB Welcomes Overdue Proposed RFS Volumes

Future growth in volumes is appreciated but marred by retroactive reductions to 2020 volumes

WASHINGTON, DC – Today, the National Biodiesel Board welcomed the Environmental Protection Agency’s proposed Renewable Fuel Standard rule and the USDA’s announcement of COVID relief for biofuel producers and funds for the Higher Blend Infrastructure Incentive Program. EPA’s proposal would increase 2022 advanced volumes and restore improperly waived volumes from prior years.

Kurt Kovarik, NBB’s Vice President of Federal Affairs, stated, “During the past two years’ economic challenges, our industry worked hard to meet growing U.S. demand for cleaner, better fuels. We are confident that we can continue to grow and innovate to meet additional market needs. EPA’s rule provides some growth for advanced biofuels in 2022 and we hope puts an end to the demand destruction that resulted from unwarranted small refinery exemptions. We look forward to working with the agency to getting the RFS back on track. And we greatly appreciate the economic relief and incentives for infrastructure that USDA is announcing.

“The long delay in setting 2021 volumes is a missed opportunity,” Kovarik continued. “Moreover, EPA is setting a bad precedent by recalculating the 2020 obligations. The retroactive lowering of volumes creates uncertainty about future growth.”

In 2020, the U.S. biodiesel and renewable diesel market grew to 3 billion gallons — its highest volume ever — and generated more than 4.5 billion advanced biofuel credits (Renewable Identification Numbers or RINs). Through the first ten months of 2021, the industry maintained a sustainable production rate comparable to 2020. EPA is proposing sustainable growth opportunities consistent with industry expectations along with a statutorily required increase of 500 million gallons in the overall advanced biofuel category.

EPA is not providing guidance on 2023 biomass-based diesel volumes, which were due under the statute on November 30, 2021.

The U.S. biodiesel and renewable diesel industry supports 65,000 U.S. jobs and more than $17 billion in economic activity each year. Every 100 million gallons of production supports 3,200 jobs and $780 million in economic opportunity. Biodiesel production supports approximately 13 percent of the value of each U.S. bushel of soybeans.

Made from an increasingly diverse mix of resources such as recycled cooking oil, soybean oil and animal fats, biodiesel and renewable diesel are better, cleaner fuels that are available now for use in existing diesel engines without modification. NBB is the U.S. trade association representing the entire biodiesel and renewable diesel value chain, including producers, feedstock suppliers, and fuel distributors.

National Sorghum Producers Mixed on EPA RVO Patchwork Proposal

WASHINGTON, DC (December 7, 2021)—The U.S. Environmental Protection Agency today released a proposal to retroactively slash biofuel quotas for 2020 while simultaneously ramping up blending requirements for 2022. National Sorghum Producers Chairman Kody Carson, a sorghum farmer from Olton, Texas, released the following statement, in response to the Agency’s actions:

“The EPA announcement is a patchwork proposal. The bid to roll back 2020 RVOs is deflating, but in the same breath, we are encouraged to see the proposed increase in obligations to historic levels for 2022 and denial of pending SREs. Congress was clear in their intent when they crafted the Renewable Fuels Standard to spur increased production and blending of biofuels. At a time when farmers are facing record high costs of production, historic regulatory uncertainty and extreme weather challenges, going backward on past obligations will further weaken the largest domestic market to the detriment of American farmers and rural communities. We encourage the EPA to reverse this proposed action on 2020 RVOs and move forward with strengthened blending intent for 2022.”

Axne, Craig, Kind, Pocan Statement on Proposed Renewable Fuel Obligations

WASHINGTON – Today, Co-Chairs of the House Biofuels Caucus Cindy Axne (IA-03), Angie Craig (MN-02), Mark Pocan (WI-02) joined U.S. Rep. Ron Kind (WI-03) to issue the following statement on the Environmental Protection Agency’s proposed Renewable Fuel Obligations for 2021 and 2022 and  revision of the 2020 target:

“After months of unnecessary delay, we are glad that the EPA has released the long-overdue Renewable Volume Obligations. The 2022 number sets the biofuels industry on the right path moving forward. And the end of the abuse of Small Refinery Exemptions – which provide relief to oil companies at the expense of family farmers – is welcome news.

These decisions will help lower prices at the pump for hardworking Americans and accelerate the positive impact that biofuels can and must play in our effort to decarbonize the transportation sector, tackle climate change, and drive economic growth across rural America.

However, the proposed decision to retroactively lower the 2020 RVO target does not reflect a sufficient commitment to renewable fuels and family farmers. As we have emphasized in repeated conversations with the Administration, now is the time to invest in renewable biofuels and the communities they support – not to prioritize the interests of fossil fuel companies that continue to ignore the law of the RFS.

We look forward to conversations about changing the proposed 2020 RVO number to better reflect the role biofuels must have in our clean energy economy.”