EPA releases renewable fuel volumes: Is the RFS “back on track” or was this “a missed opportunity”?

From Washington, the bioeconomy’s (usually) annual Rorschach test has arrived again, with the release of Renewable Volume Obligations (RVOs) for 2020 (retroactive), 2021 (uh, retroactive), and 2022. These are the annual Federal mandated volumes for the blending of renewable fuels in the US.

More than a dozen trade associations and policymakers offered reaction to the EPA announce, ranging from “RFS is back on track” from the light duty vehicle ethanol side to “missed an opportunity” from the heavy-duty side.

The volumes

The final rule includes 510 million gallons for the cellulosic biofuel category in 2020, 560 in 2021 (a 10% increase), and 630 in 2022 (a 13% increase), 95% of which comes from biogas-derived renewable natural gas. For comparison, in the Proposed Rule EPA released in December 2021, the 2022 obligation for cellulosic biofuel was set at 770 million gallons. The reduction from 770 million gallons to the final obligation of 630 million gallons is greater than the increase in obligations from 2020-2022.

The final rule also increases the biomass-based diesel category and advanced biofuel category to a total of 5.05 billion gallons in 2021 and 5.63 billion gallons for 2022.

For 2022, EPA will follow the law by setting the Renewable Volume Obligation (RVO) for conventional biofuel at 15 billion gallons. EPA also finalized the delayed 2021 volume at 13.79 billion gallons, an increase of 470 million gallons from the proposal, which tracks actual ethanol use for the year. While the 2022 volume supports growth and the 2021 volume represents an improvement from the proposal, EPA unfortunately is finalizing its unprecedented step of retroactively reopening and reducing the previously settled 2020 volumes by 2.5 billion gallons. Lastly, and importantly, EPA’s final rule maintains the 250 million gallons of remanded conventional biofuels that were added as a result of a 2017 court decision and denies the 69 pending small refinery exemptions.

Two big changes in this ruling

Supplemental Obligation. EPA also established a 250-million-gallon “supplemental obligation” to the volumes finalized for 2022 and stated its intent to add another 250 million gallons in 2023, to address the remand of the 2014-2016 annual rule by the DC Circuit Court of Appeals in Americans for Clean Energy v. EPA.

Intermediates now allowed.  Action also establishes a regulatory framework that allows biointermediates to be included in the RFS program, while ensuring environmental and programmatic safeguards are in place.

Reaction from the stakeholders

Senator Deb Fischer of Nebraska

“It’s always one step forward, three steps back with the Biden Administration and biofuels.While the 2022 RVOs are significant, retroactively lowering the 2020 RVOs directly undermines these gains and contradicts Biden’s campaign promises. Making matters worse, the administration has decided to postpone small refineries’ compliance with the RFS, which hurts the integrity of the whole system.

“Cushioning these bad announcements with the release of long-overdue COVID assistance for producers that was available over a year and a half ago doesn’t change the facts. The President’s actions demonstrate he isn’t committed to supporting rural America or pursuing an all-the-above energy strategy.”

American Biogas Council

“We understand why the final volumes are lower than anticipated, mostly because of actual year-to-date production, but we are concerned that the lower volumes undersell the true growth of the biogas industry. There are several reasons to believe that the actual production coming soon will be significantly higher: new RNG projects have increased by 47% in the last year; on-farm projects have increased by 21%; and major companies have announced investments in new RNG projects totalling over $2B – twice the industry’s total investment in 2020. EPA’s final volumes only recognize a 13% growth from 2021-2022. We are hopeful that future volumes will anticipate the higher growth we see from American biogas fuel providers and developers.”

Coalition for Renewable Natural Gas

“RNG consistently provides more than 95% of the fuel used to meet the RFS program’s cellulosic biofuel target. The 23.5% increase from 2020 to 2022 for cellulosic biofuels provided in the final volume standards demonstrates the vital role RNG will continue to play in meeting our nation’s demand for clean and sustainable transportation fuels.

“The 2022 cellulosic standard is more than double the 2017 standard (311 million gallons), demonstrating significant growth in RNG in the past five (5) years. We have worked with EPA on the small refinery exemption issue for several years. Retroactive exemptions undermine the RFS. We thank EPA for taking decisive action on SREs. Not all of EPA’s policy decisions in the rule went RNG’s way. EPA sided with refineries over biofuels in its decision not to count available “carryover” RINs in the standard – electing to maintain a RIN bank from year to year.”

National Corn Growers Association (NCGA)

“More ethanol in the fuel supply saves Americans money at the pump and lowers greenhouse gas emissions. Higher renewable fuel volumes for this year, which will increase and diversify our fuel supply, come at a crucial time as policymakers are working to lower fuel prices. When President Biden visited an Iowa ethanol production facility in April, he said ethanol reduces our reliance on foreign oil, creates choice and competition at the pump for better prices, creates good-paying jobs and reduces greenhouse gas emissions. Farmers agree, and the increased RFS volumes for 2022 and denial of pending refinery exemptions will advance these objectives and move renewable fuels forward.”

Clean Fuels Alliance America

“Clean Fuels and its members appreciate EPA Administrator Regan’s recognition that homegrown, clean fuels offer a better solution to high fuel prices stemming from high oil prices and supply shortages. We support EPA’s efforts to get the Renewable Fuel Standard back on track and to finalize 2022 volumes as a jumping off point for future growth. We stand ready to work with the agency to move forward and set volumes for 2023 and beyond. And we encourage the agency to quickly finalize new feedstocks pathways, such as that for canola oil. Biodiesel and renewable diesel are essential to keeping the U.S. economy moving right now, meeting more than 5 percent of the nation’s need for heavy duty transportation and shipping fuel. The clean fuels industry increased production and supply even during the economic emergency of the last few years, helping Americans save 4% on the cost of diesel fuel and all the other consumer items that rely on diesel fuel for shipping.”

Growth Energy

“These last six months have been a rude awakening for those who have grown complacent about U.S. energy supplies. EPA’s 2022 renewable fuel blending requirements will deliver savings at the pump for working families, slash carbon emissions, and strengthen U.S. energy security by bringing more American renewable fuel into our fuel supply. In just the last few months, E15 has been a shield against skyrocketing fuel prices, saving drivers almost $0.60 per gallon in some areas while American biofuels cut greenhouse gas emissions by 46 percent compared to gasoline. We applaud President Biden and his EPA for this action, which will set the direction of total and advanced renewable fuel volumes for 2023 and beyond.”

Renewable Fuels Association (RFA)

“At long last, the RFS is being put back on track. Today’s actions by EPA and the Biden administration restore integrity and stability to the RFS program after several years of wanton mismanagement and abuse by the previous administration. The combination of a strong RVO for 2022, restoration of illegally waived volume from 2016, and a new direction for the SRE program puts the RFS program on solid footing for the future. We thank Administrator Regan and President Biden for honoring their commitments to implement the RFS in a way that is fair, transparent, and focused on growth. By requiring petroleum refiners to blend larger volumes of low-cost biofuels like ethanol, today’s actions will put downward pressure on gas prices and provide economic relief to American families facing record-high pump prices. In the last few days alone, wholesale ethanol prices have been as much as $1.30 per gallon lower than gasoline, leading to significant savings at the pump for consumers of ethanol-blended fuels like E10, E15, and E85.”

The Advanced Biofuels Association

“With this RVO ruling, the Biden administration has missed an important opportunity to prioritize advanced low carbon fuels that will help America achieve its climate ambitions and support American energy independence. We were, however, pleased to see the regulations permitting the use of biointermediates finalized in this rule, enabling our members using these processes to participate in the RFS program and increasing the volumetric potential of the advanced biofuels industry now and in the years to come.”

“Fortunately, the administration will have a chance to strengthen the development of America’s low carbon fuel industry and broaden our national supply of renewable fuel sources by setting a more progressive path under the forthcoming “Set” process. The ABFA strongly encourages the EPA to provide certainty to the advanced biofuels industry by finalizing the volume standards for 2023 before the end of 2022.

Iowa Corn Growers Association

“By following the law for 2022, maintaining the remanded gallons from the court order and denying the 69 small refinery exemptions, drivers will have more access to more affordable, cleaner-burning, homegrown ethanol in their tanks. We are all feeling the pressure at the pump with higher fuel prices, so this decision by EPA is a step in the right direction to give farmers more access to markets while also providing more renewable fuel for our vehicles. It’s a win-win.”

American Coalition for Ethanol

“While we strongly object to the unnecessary retrospective cut EPA is making to 2020 volumes, we are pleased the Agency is upwardly revising the 2021 volumes to align more closely with actual consumption and upholding base conventional volume of 15 billion gallons for 2022, along with 250 million supplemental gallons to address the DC Circuit court order in 2017. ACE members are also thankful EPA is reining in the abusive use of SRE waivers pioneered under the last Administration. When taken as a whole, today’s actions begin to get the RFS back on track and fulfill Administrator Regan’s commitment to follow the law and science when it comes to this program. However, continued vigilance is required to undo prior and prevent future mismanagement of the RFS — the only tool at EPA’s disposal to replace expensive foreign fossil fuel with low-cost, low-carbon and homegrown biofuels such as ethanol. Given pump prices remain at record high levels and the need to decarbonize the transportation sector, it’s particularly important to leverage the program’s full potential.”

Iowa Renewable Fuels Association

“IRFA appreciates the Biden EPA getting the RFS back on track in 2022 and increasing the 2021 blending target compared to the proposal,” said  (IRFA) Executive Director Monte Shaw. “But we also cannot ignore that today’s final rule creates uncertainty. Any of these numbers that look good today could be revised downward in the future. But we’re going to plan for the best, and today, this rule means greater use of lower-cost biofuels to help save consumers money at the pump.”

The Bottom Line: Action for 2023 soon

Sen. Deb Fischer of Nebraska spoke for all when she noted, “Looking to the future, it is imperative that the administration set robust 2023 RVOs in a timely manner. Doing so will ensure the country is leveraging the power of biofuels to lower costs at the pump and provide consumers with needed financial relief.”

RFS rulings never please everybody — if renewable fuels are happy, generally fossil fuel folks are grumbling, and vice-versa. This package from EPA had the distinction of also dividing the renewable fuels trade associations. Generally speaking, the ethanol sector was positive about 2022 with reservations over retroactive volumes. The heavy-duty sector no doubt is looking at the 10+ billion gallons in capacity that the sector intends to build soon and wonders if any when the volumes will be placed within the program.

Not all global RD/SAF capacity is going into the US, but the lion’s share of it is — in part driven by opportunities presented by Low Carbon Fuel Standards on the US West Coast. It’s worth keeping in mind that RD and SAF count as 1.7 gallons for RFS purposes, because they have higher energy density. To illustrate, 10 billion gallons of global RD/SAF capacity represents 17 billion gallons of RFS capacity. Given conventional ethanol’s 15 billion gallons, 2 billion gallons for US biodiesel and at least 2 billion gallons for the long-term opportunities for RNG, the RVOs are much lower than industry’s potential to build capacity. The annual RVO announce is becoming a brake on the decarbonization of US transportation instead of the accelerator it was intended by Congress to be.