Feather on the pedal: EPA proposes renewable fuels slash for 2020, cuts for 2021, slow growth in 2022

In Washington, the Environmental Protection Agency released its proposed Renewable Fuel Standard volumes for 2021 and 2022, and a retroactive action on 2020 volumes that has the ethanol industry up in arms. Advanced biofuels producers were cautiously optimistic, biogas producers took a more positive view, noting that cellulosic volumes would increase 51% between 2020 and 2022. Ethanol producers didn’t like the 2021 volumes but were generally positive about 2022 volumes, and action on small refinery waivers. In all, it was a mixed reception. 

The EPA proposal on 2022 is a few days late, and the 2021 proposal is more than a year overdue — in all, a good thing that Congressional deadlines are not library books, EPA would be facing a lot of late return fines.

Here’s the tale of the tape:

2020 conventional biofuels – 15 billion gallons FINAL
2020 conventional biofuels – 12.5 billion gallons REVISED
2021 conventional biofuels – 13.3 billion gallons
2022 conventional biofuels – 15 billion gallons

2020 advanced biofuels – 5.09 billion gallons FINAL
2020 advanced biofuels – 4.63 billion gallons REVISED
2021 advanced biofuels – 5.2 billion gallons
2022 advanced biofuels – 5.77 billion gallons

2020 biomass-based diesel – 2.43 billion gallons FINAL
2020 biomass-based diesel – 2.43billion gallons REVISED
2021 biomass-based diesel – 2.43 billion gallons
2022 biomass-based diesel – 2.76 billion gallons

A dent in America’s turn towards low-carbon fuels

Even in the content of biomass-based diesel, which fared much better than ethanol, the EPA action can be seen as placing a feather on the renewable fuels pedal, precisely when the Administration is making huge long-term commitments for the country. 

A lot of voices pointed to “a step in the right direction” toewards getting “RFS back on track”. Most commentators were polite enough. The National Biodiesel Board was positive enough about their 2.43 billion gallon biomass-based diesel mandate. But they pointed out that 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.  The numbers are trending in the right direction, but are lagging where producers already are, and do not match the Administration rhetoric on renewable fuels.

It’s the pandemic, of course

In particular, the 2020 numbers reflect the sharp declines in fuel consumption. 2021 as well. The message from the Administration appears to be “Hey, we all have to share the pain in 2020 and 2021, and we’ll be back on track in 2022 when the economy returns to a normal footing.”

Grassley, Fischer lead the Bronx cheers

US Senator Chuck Grassley of Iowa said, “At a time when gas prices are through the roof and the administration is myopically focused on climate policy, it makes absolutely zero sense for President Biden to turn his back on cleaner, cheaper biofuels. The administration’s unprecedented plan to retroactively cut blending levels for previous years is a boon for Big Oil. What’s to stop the administration from slashing 2022 obligations down the line? No matter how rosy future outlooks might be, this precedent makes clear the administration is not committed to renewable fuels. It’s a disgrace and an outrage to Iowa producers and anyone who cares about our environment.

“This administration has spent much of its first year crowing about its climate priorities while simultaneously begging OPEC to reduce skyrocketing oil costs. Domestically-produced biofuels help to solve both of these problems, but the Biden Administration opted not to take yes for an answer. I don’t want to hear another word about President Biden’s so-called climate priorities until he puts his money where his mouth is and delivers cleaner, cheaper biofuels for Americans, just as he promised Iowans on the campaign trail.”

U.S. Senator Deb Fischer of Nebraska said: “The Biden administration claims to care about addressing climate change but is giving big oil a huge break at the expense of the farmers in the Heartland who produce cleaner fuel. That doesn’t add up. Retroactively lowering the 2020 RVOs and setting low 2021 RVOs is a betrayal of the hardworking men and women of rural America. To pile on, the administration is trying to conceal this bad news by taking credit for biofuels COVID-19 assistance I fought for that Congress passed and President Trump approved in 2020. The administration held this assistance back for three extra months and is releasing it now to distract Americans from its actions. Further, it appears the administration has intentionally delayed denying 65 small refinery exemptions until today, instead of letting the biofuel industry know sooner and providing certainty. The administration has broken its promises. I will continue to work with my colleagues on both sides of the aisle to fight for fairness and certainty for our ethanol producers.”

Action on small refinery waivers sinks 2020 levels, further

Monte Shaw of the IRFA noted:

“The reopened 2020 rule was not only reduced, but a hard-fought victory for biofuels supporters was removed, further destroying demand. After years of abusing the RFS refinery exemption process, former President Trump, under pressure from Congress and Governors, agreed to account for refinery exemptions when setting the RFS levels. Today’s proposal would remove the three-year rolling average of past exemptions that was finalized as part of the 2020 rule.

“This industry endured four years of illegal demand destruction through the abuse of refinery waivers during the previous administration,” stated Shaw. “Even former President Trump finally agreed it was necessary to repair this harm. After criticizing the Trump era refinery exemptions, it’s hard to understand why the Biden EPA would seek to reverse time and remove the very provision designed to undo the damage. It feels like an unnecessary gut punch that will destroy 770 million gallons of future biofuel blending.”

Reaction from the stakeholders

Michael McAdams, president, Advanced Biofuels Association

“On behalf of the members of ABFA we are pleased with the release of the RVO mandate prior to the end of the year.  In society’s collective goal to reduce carbon in our future, ABFA members stand ready to increase the number of gallons of advanced biofuels products that exceed the minimum 50% carbon reduction requirement.  With a particular focus on heavy duty diesel, marine fuels, heating oil, as well as aviation, we are on a mission to reduce carbon in the future.

“Releasing the RVO today, will help us plan for the coming year and sends some clear signals of support for our industry.  We are supportive and grateful for the manner in which the EPA addressed the issue of small refinery exemptions going forward by deny the pending exemptions.  As ABFA argued going back to 2018, the manner in which these were doled out in 2018, 2019, and 2020 was unprecedented and undercut the purpose of the RFS program.”

Monte Shaw, executive director, Iowa Renewable Fuels Association

“The Biden EPA’s proposal to reopen the finalized 2020 rule is ill conceived, illogical, and, we believe, illegal,”  “The EPA has long maintained it does not have the authority to reopen a final RVO rule and we agree. Further, the self-correction mechanisms in the RFS have already adjusted the biofuels requirement for 2020 down to account for COVID-related reduced gasoline use. Adjusting the 2020 levels down further is biofuel demand destruction pure and simple. Further, the 2021 number was reduced well below actual blending. That’s unfathomable and, if allowed to stand, would blow apart the many commitments President Biden made to Iowa voters when running for president. We have not forgotten that Biden said the RFS ‘marks our bond with our farmers and our commitment to a thriving rural economy.’ We urge President Biden to ensure the final rule lives up to his promise.”

POET Senior VP of Government Affairs Joshua Shields

EPA’s draft rule would reduce access to the single most affordable and abundant source of low-carbon liquid fuel on the planet right at the moment when consumers are facing high gas prices, and political leaders are grasping for climate solutions that are within reach. The Biden Administration should fulfill the President’s campaign promises to support the Renewable Fuel Standard, which will continue to affordably decarbonize the nation’s existing vehicle fleet, create clean energy jobs and support American farmers. We urge the EPA to consider the consequences of reducing biofuel volumes, reinstate robust blending targets and, as the President said, ‘Get the RFS back on track’ before the rule is finalized.”

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.” 

Chris Edgington, 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.”

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.”

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.”

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.”

“We do want to say a strong thank you for the COVID relief funding announced today and for the Biden EPA stepping up to begin applying the 10th Circuit Court ruling to all refinery exemption determinations,” stated Shaw. “Having said that, I’d be lying if I didn’t acknowledge the frustration I’ve heard out here of having to wait for these announcements that could have come in March just so the Biden EPA would have a spoonful of sugar to try to help the proposed RVO demand destruction go down. These disparate actions are not tied to one another and should stand on their own merits.”

Coalition for Renewable Natural Gas Founder and CEO Johannes Escudero  

“We welcome EPA issuing proposed RFS volume requirements providing for a 51% increase in the program’s cellulosic biofuel target between 2020 and 2022. EPA’s continued support for the expanded production and use of RNG is much appreciated. As this process moves ahead, we look forward to working constructively with the Biden administration to finalize the 2021 and 2022 standards as soon as possible and make further improvements to the proposal,” said Escudero.

RNG facilities capture methane, a potent and harmful greenhouse gas (GHG), that would otherwise escape into the atmosphere from organic waste streams at landfills, wastewater treatment facilities, dairies, and commercial food waste facilities and repurpose it as a clean energy source. RNG is fully fungible with conventional natural gas and is used as a direct substitute for most transportation, commercial, industrial, and residential natural gas applications.

American Biogas Council executive director Patric Serfass

“Thank you to EPA for issuing the RVO for next year which helps the industry continue to develop new projects. We appreciate EPA’s recognition of 20-25% annual growth in the D3/cellulosic category, 95% of which is renewable natural gas made from biogas. However, we have observed actual industry growth this year that is two times higher. We therefore encourage EPA to revise these cellulosic volumes upward in the final rule.

“In addition, we continue to be extremely disappointed that EPA has again failed to recognize renewable electricity from biogas in its volumes for now the seventh year in a row. We implore EPA to take action quickly to approve the dozens of projects already registered and again revise the RVO for cellulosic biofuel upward to recognize this additional renewable fuel production for battery and fuel cell electric vehicles.”

American Coalition for Ethanol (ACE) Senior Vice President Ron Lamberty 

“Despite being one of the most important tools available to replace petroleum with low carbon alternatives such as ethanol, today’s proposed rule misses an important opportunity to meet the Biden Administration’s decarbonization goals for the transportation sector. Instead of insisting on renewable fuel volumes required under the law, EPA’s novel approach to its authority results in the foot being taken off the decarbonization accelerator to let petroleum companies determine how much ethanol they wanted to blend in 2020 and 2021. This is not the way to drive low carbon transportation fuel alternatives quickly.

“Further, while we appreciate that EPA is proposing to return corn ethanol blending levels to 15 billion gallons in 2022 as well as proposing a path forward to restore the 500 million gallons of remanded volume as ordered by the DC Circuit Court in 2017, and rein-in the abusive use of SRE waivers pioneered under the last Administration, the proposal falls short of deploying the RFS in a manner that fully takes advantage of expanding the use of low carbon ethanol, which according to the latest lifecycle science reduces greenhouse gas emissions on average by approximately 50 percent compared to gasoline.

“The RFS is an exceptionally well-written law with provisions written into it to deal with even the devastating volume loss experienced in 2020 and 2021. Each year’s volume is converted to a percentage, so renewable fuel volumes automatically rise or fall based on actual fuel sales. By reducing the 2020 percentage and 2021 volumes EPA is essentially shifting more of the pandemic burden from refiners to ethanol producers and farmers, and allowing gallons already sold to be counted against 2022 volumes, extending the pain into another year. EPA is missing the mark on using the RFS to the fullest extent.

“Our comments on this rule will reflect on EPA’s novel interpretations of its waiver authority and will encourage EPA to take a second look at this proposal to better support low carbon biofuels and take actions to help grow demand for biofuels that benefit rural America as well as the Administration’s decarbonization goals.”

Iowa Soybean Association President Robb Ewoldt

“Iowa soybean farmers welcome the EPA’s announcement to improve 2022 biofuel volumes and expand biofuel infrastructure. These decisions not only send a clear message to growers, but further demonstrates the important role homegrown energy plays in expanding rural vitality and meeting carbon emission goals outlined by the Biden Administration. While farmers remain optimistic in light of these biofuel investments, the agency should not ignore the reservations made by growers caused by volume delays in recent years. Producers will continue to urge the EPA to make timely announcements outlining future plans and volume decisions to ensure confidence in the RFS program moving forward.”