EPA lifts renewable fuels in 2018-2020 proposal: industry welcomes volumes, warns on refinery waiver imapct : Biofuels Digest

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In Washington, EPA issued proposed volume requirements under the Renewable Fuel Standard program for cellulosic biofuel, advanced biofuel, and total renewable fuel for calendar year 2019. EPA also proposed biomass-based diesel volume standards for calendar year 2020.

Here are the proposed volumes:

The EPA proposed the Renewable Volume Obligations (RVO) for the biomass-based diesel category would increase from 2.1 billion gallons in 2019 to 2.43 billion gallons in 2020. The advanced biofuel category, for which biodiesel also qualifies, would also increase slightly from 4.29 billion gallons in 2018 to 4.88 billion gallons in 2019, under the EPA’s proposal.

The complete EPA proposal can be downloaded here.

Key excerpts from the proposed rule

Cellulosic Biofuel 

EPA must annually determine the projected volume of cellulosic biofuel production for the following year. If the projected volume of cellulosic biofuel production is less than the applicable volume specified in section 211(o)(2)(B)(i)(III) of the statute, EPA must lower the applicable volume used to set the annual cellulosic biofuel percentage standard to the projected production volume. In this rule we are proposing a cellulosic biofuel volume requirement of 381 million ethanol-equivalent gallons for 2019 based on our production projection. Our projection reflects consideration of RIN generation data for past years and 2018 to date that is available to EPA through EMTS; the information we have received regarding individual facilities’ capacities, production start dates, and biofuel production plans; a review of cellulosic biofuel production relative to EPA’s projections in previous annual rules; and EPA’s own engineering judgment. To project cellulosic biofuel production for 2019 we used the same basic methodology described in the 2018 final rule. However, we have used updated data to derive percentile values used in our production projection for liquid cellulosic biofuels and to derive the year-over-year change in the rate of production of CNG/LNG derived from biogas that is used in the projection for CNG/LNG. EPA anticipates that our final projection of cellulosic biofuel will be based on additional data we will obtain prior to issuing the final rule, including an estimate of cellulosic biofuel production for 2019 to be provided by the Energy Information Administration (EIA). 

Advanced Biofuel 

If we reduce the applicable volume of cellulosic biofuel below the volume specified in CAA section 211(o)(2)(B)(i)(III), we also have the authority to reduce the applicable volumes of advanced biofuel and total renewable fuel by the same or a lesser amount. We refer to this as the “cellulosic waiver authority.” The conditions that caused us to reduce the 2018 volume requirement for advanced biofuel below the statutory target remain relevant in 2019. As for 2018, we investigated the projected availability of non-cellulosic advanced biofuels in 2019. We took into account the various constraints on the ability of the market to make advanced biofuels available, the ability of the standards we set to bring about market changes in the time available, the potential impacts associated with diverting biofuels and/or biofuel feedstocks from current uses to the production of advanced biofuel used in the U.S., the fact that the biodiesel tax credit is currently not available for 2019, the tariffs on imports of biodiesel from Argentina and Indonesia, as well as the cost of advanced biofuels. Based on these considerations we are proposing to reduce the statutory volume target for advanced biofuel by the same amount as we are reducing the statutory volume target for cellulosic biofuel. This would result in an advanced biofuel volume for 2019 of 4.88 billion gallons, which would be 590 million gallons higher than the advanced biofuel volume for 2018. 

As for advanced biofuel, we are proposing the maximum reduction permissible under the cellulosic waiver authority. We are proposing that the reduction in total renewable fuel would be the same as the reduction in advanced biofuel, such that the resulting implied volume requirement for conventional renewable fuel would be 15 billion gallons. 

2020 Biomass-Based Diesel 

In EISA, Congress specified increasing applicable volumes of BBD through 2012. Beyond 2012 Congress stipulated that EPA, in coordination with DOE and USDA, was to establish the BBD volume taking into consideration implementation of the program to date and various specified factors, provided that the required volume for BBD could not be less than 1.0 billion gallons. For 2013, EPA established an applicable volume of 1.28 billion gallons. For 2014 and 2015 we established the BBD volume requirement to reflect the actual volume for each of these years of 1.63 and 1.73 billion gallons. For 2016 and 2017, we set the BBD volume requirements at 1.9 and 2.0 billion gallons respectively. Finally, for 2018 and 2019 the BBD volume requirement was set a 2.1 billion gallons. We are proposing to increase the BBD volume for 2020 to 2.43 billion gallons. 

Given current and recent market conditions, the advanced biofuel volume requirement is driving the production and use of biodiesel and renewable diesel volumes over and above volumes required through the separate BBD standard, and we expect this to continue. While EPA continues to believe it is appropriate to maintain the opportunity for other advanced biofuels to compete for market share, the vast majority of the advanced biofuel obligations in recent years have been satisfied with BBD. Thus, after a review of the implementation of the program to date and considering the statutory factors, and in light of the 500 million gallon increase we are proposing for non-cellulosic advanced biofuels, we are proposing, in coordination with USDA and DOE, an applicable volume of BBD for 2020 of 2.43 billion gallons.

Reaction from the stakeholders

Advanced Biofuels Association

“ABFA is pleased to see that EPA has continued to increase the overall RVO mandates for the RFS program and particularly for the advanced biofuel pool,” said Michael McAdams, president of ABFA. “ABFA is proud to represent several members commercializing new technologies to produce increasing volumes of cellulosic fuels,” McAdams furthered. “Additional cellulosic facilities are scheduled to come on line in the near future, and we are pleased to see an RVO that will ensure a market for these new gallons.”

“We are also pleased with the continued success of the biodiesel and renewable diesel sectors, as these fuels cumulatively provide the greatest greenhouse gas (GHG) emissions reductions under the RFS program at this time,” said McAdams. “Three of our members are currently building new plants in the United States to produce the drop-in diesel fuels of the future.”

“Despite these increases, we continue to be concerned by the rate at which EPA is granting small refiner exemptions under the RFS program,” commented McAdams. “These exemptions have a net effect of reducing the volume of renewable fuels blended in the United States. ABFA will continue to fight this effort to undermine the RVO. We look forward to submitting comments in support of increased advanced, biodiesel, and renewable diesel mandates to EPA as these RVOs are finalized.”

Growth Energy

“The EPA proposed 15 billion gallons for conventional biofuels,” said Growth Energy CEO Emily Skor, “but that still isn’t a real number we can count on. This plan fails to ensure those gallons will, in fact, be blended. By neglecting to reallocate gallons lost to waivers, the EPA is doubling down on another year of an estimated 1.5 billion gallons in demand destruction. 

“The same holds true for advanced and cellulosic biofuels, which are rapidly delivering new economic opportunities for rural communities and driving America’s leadership in clean energy. The targets proposed today promise growth, but those investments can’t move ahead unless the EPA makes it clear that goals set by Congress will be enforced.

“The proposed RVOs also fail to restore the volumes lost to waivers for 2016, despite a court ruling last July that requires EPA to restore 500 million gallons of biofuel demand. The EPA cannot continue to enrich the largest oil companies and refiners at the expense of struggling U.S. farmers. 

“Keeping the RFS on track is the right thing to do – not only for America’s farmers but for the future of clean energy. Americans are breathing cleaner air every day, thanks to the RFS. As a nation, we must not lose sight of what the RFS was designed to do, and we urge the EPA to follow through on the president’s pledge for year-round sales of E15 and to restore the gallons that have been lost due to refinery exemptions.”

National Biodiesel Board

“We welcome the Administration’s proposal to grow the biodiesel volumes, following two flatlined years. This is a positive signal for our industry and we’re pleased the EPA has acknowledged our ability to produce higher volumes. We’ve consistently demonstrated that we can do much more,” said Kurt Kovarik, vice president of federal affairs at NBB. “The fact remains, though, instability in the RFS program caused by the EPA has done significant damage that can only be rectified for biodiesel through consistent and predictable growth in volumes.”

Kovarik pointed to decisions by the EPA Administrator to provide numerous waivers to petroleum refiners that release them from their obligations under the RFS, effectively reducing the overall volumes under the program in 2016 and 2017. Those exemptions have effectively reduced current obligations for biodiesel by 100 million gallons in 2016 and 275 million gallons in 2017.

“As a candidate on the campaign trail, Donald Trump pledged he would support biofuels and protect the RFS,” Kovarik said. “While this is just a proposal, we hope the Administration is serious about growing biodiesel volumes and will fulfill the president’s promise to support and grow the RFS.”

American Coalition for Ethanol

“While EPA says it is proposing to maintain the 15-billion-gallon conventional blending target for 2019, in reality Administrator Pruitt’s ongoing actions will reduce ethanol blending far below 15 billion gallons,” said American Coalition for Ethanol CEO Brian Jennings. This is a missed opportunity to reallocate the 1.5 billion gallons Administrator Pruitt has waived through Small Refinery Exemptions and to restore the 500 million gallon shortfall the D.C. Circuit Court ordered EPA to deal with following the Americans for Clean Energy et al v. EPA lawsuit. 

“Administrator Pruitt continues to disregard President Trump’s campaign promise that ‘the EPA should ensure that biofuel blend levels match the statutory level set by Congress under the RFS.’ The 2019 proposed RVOs reinforce our decision to challenge certain Small Refinery Exemptions in Court and to petition EPA to account for lost volumes of renewable fuel resulting from the unprecedented number of retroactive Small Refinery Exemptions granted by the agency. 

“The proposal to modestly increase cellulosic and advanced RVOs for 2019 is welcome but EPA’s waivers and exemptions have collapsed RIN prices across-the-board discouraging investment in the production and use of cellulosic and advanced biofuels.

“A strong rural economy depends upon growing the use of renewable fuels. The President needs to direct Administrator Pruitt to discard EPA’s refiner win-at-all-costs mentality and carry out another of his promises to allow E15 and higher blends market access year-round.

“Finally, we will carefully consider EPA’s proposals regarding the transparency of the RIN market. The Commodity Futures Trading Commission (CFTC) has authority to investigate claims of RIN price manipulation. In March of 2016, EPA signed a Memorandum of Understanding with CFTC to investigate and identify any market abuse by RIN traders.  It might make sense to disclose more information about the RIN market but we would oppose prohibiting blenders and wholesalers from handling RINs because those parties have used RIN proceeds to reduce pump prices and pay for higher blend infrastructure.”



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