EPA’s Renewable Fuels Proposal Sees Minor Changes

The EPA has taken the middle ground in its proposed rule setting the renewable volume obligations (RVOs) or the minimum amount of renewable fuels that must be supplied to the market in 2018 under the Renewable Fuels Standard (RFS) (Section 211 of the Clean Air Act).

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Specifically, the Agency is seeking to maintain the 2017 15-billion-gallon (gal) RVO for conventional renewable fuels, which is also the level set by Congress. The CAA gives the EPA the authority to waive a congressionally established RVO if the Agency finds that producers and importers will not be able to meet those targets. The fact that the Agency is proposing to maintain the conventional renewable fuel level at the 2017 level relieves the renewable fuels industry of concerns that EPA Administrator Scott Pruitt, who is viewed as a strong supporter of the petroleum industry, would move to waive the statutory minimum. Also proposed for 2019 is the same 2.1-billion-gal RVO for biomass-based diesel the Agency set for 2018.

However, the EPA does seek to apply its waiver authority by lowering the proposed RVO for cellulosic biofuel from 2017’s 311 million gal to 238 million gal in 2018 and the proposed RVO for advanced biofuel from 2017’s 4.28 billion gal to 4.24 million gal in 2018. These two proposed reductions indicate that there is a small reduction in the proposed total RVO for 2018.

Cellulosic Realities

The reduction in the proposed RVO for cellulosic biofuel results in part from market assessments the EPA has made in the past. The Agency now says that its projections of liquid cellulosic biofuel were higher than the actual volume of liquid cellulosic biofuel produced in both 2015 and 2016. “We believe that new data warrants a change to the methodology for projecting liquid cellulosic biofuel in an effort to make the projections more accurate,” the Agency now says. The proposal includes a discussion of the companies and facilities the EPA expects to be in a position to produce commercial-scale volumes of cellulosic biofuel by the end of 2018 and describes in more detail the methodology the Agency is proposing to use to project cellulosic biofuel production in 2018.

Muted Support

Responses to the proposal were generally supportive with reservations.

“We are pleased EPA is proposing to maintain the conventional biofuel requirement at the 15-billion-gallon level required by the statute, just as EPA finalized in its 2017 RVO. By staying the course and maintaining a strong RFS, consumers will continue to benefit from the policy, including a greater choice at the pump, while breathing cleaner air and seeing a boost to local economies. We are concerned that by reducing the cellulosic RVO, this proposal may weaken the signal to the marketplace and we want to better understand EPA’s methodology.” Bob Dinneen, president and CEO of the Renewable Fuels Association

“While I am pleased the new administration has set the proposed volume requirements for conventional ethanol for 2018 at congressionally approved levels, I am disappointed that the 2019 biodiesel number was held constant, and would like to see it more accurately reflect current domestic usage and production capacity.” Senator Joni Ernst (R-IA). Iowa is first by a wide margin among the states producing corn-based ethanol.

“The [API] welcomed EPA’s proposal to slightly lower the total biofuel volume for 2018, but says that the move does not go far enough.” American Petroleum Institute (API).

The API repeated its consistent call for congressional reform of the RFS, noting that “the primary goals of the RFS have been achieved, not by ethanol mandates but by market forces and technological innovations, leaving the policy with only hypothetical benefits and added costs to consumers.”

EPA’s proposal is here.