The Environmental Protection Agency proposed Friday only a minimal increase in U.S. biofuel usage, reflecting modest growth in production of next-generation cellulosic biofuels, and the decision was immediately slammed by biodiesel producers.
EPA didn't propose any increases in conventional ethanol usage to make up for waivers granted in past years to small refineries.
The agency's proposed rule would require usage of 20.04 billion gallons of biofuels, including ethanol and biodiesel, in 2020, up from 19.92 billion gallons this year. The increase is entirely due to an expected increase in production of 122 million gallons in cellulosic biofuels.
The Renewable Volume Obligations for 2020 include 5.04 billion gallons of advanced biofuels, which includes cellulosic ethanol as well as biomass-based diesel, and 15 billion gallons of conventional corn ethanol.
The EPA also proposed to keep the biodiesel RVO for 2.43 billion gallons in 2021, the same as it is in 2020. EPA sets the biomass-based diesel RVO a year ahead of the mandates for other biofuels. Biomass-based diesel includes biodiesel, typically made from soybean oil, and renewable diesel, a form that is chemically similar to petroleum diesel.
In the proposed rule, EPA defended its decision not to increase the advanced biofuel requirements for anything other than cellulosic ethanol. The agency cited existing tariffs on imports of biodiesel from Argentina and Indonesia and the fact that the $1-a-gallon tax credit for biodiesel has lapsed.
The agency also said that holding the biomass-based diesel mandates steady though 2021 would ensure a market for other advanced biofuels, which include imported sugarcane ethanol, which qualifies as an advanced biofuel because it is produced with lower greenhouse gas emissions than conventional ethanol.
But Kurt Kovarik, vice president of federal affairs at the National Biodiesel Board, said the proposal sends a “chilling signal” to biodiesel and renewable diesel producers. He said the agency failed to consider the industry’s ability to increase production.
"EPA's proposed rule would turn the RFS program on its head. It is likely to reduce America's use of cleaner, lower-carbon biodiesel and renewable diesel for transportation over the next several years, encouraging more petroleum use," he said.
Groups representing ethanol producers blasted EPA for failing to propose increased ethanol blending requirements to account for volumes that had been reduced in the past because of the small refinery exemptions.
“It is a complete misnomer to call these blending volumes ‘obligations’ when EPA’s small refinery bailouts have essentially transformed the RFS into a voluntary program for nearly one-third of the nation’s oil refineries,” said Geoff Cooper, president and CEO of the Renewable Fuels Association.
Emily Skor, CEO of Growth Energy, said, “It’s unconscionable that EPA continues to undermine the president’s commitment to a strong rural America. The 2020 RVOs are a drop in the bucket compared to the demand lost due to a flood of refinery exemptions. Unless EPA restores demand destroyed through secret handouts to oil giants like Exxon and Chevron, these targets offer nothing but another year of lost opportunity and rural hardship."
The agency yet has to determine 38 small refinery exemptions for the 2018 compliance year. Cooper said the proposal undermines President Trump’s pledge made to farmers and renewable fuel producers that his administration would enforce the statutory RFS volumes.
EPA also declined to require any additional biofuel usage to address a court challenge of the 2016 RVOs. The case had been remanded back to the agency by the D.C. Circuit Court of Appeals for further consideration. "In light of the fact that we can no longer incent additional renewable fuel generation in 2016, and the significant burden on obligated parties of imposing an additional standard, we are proposing to retain the original 2016 total renewable fuel standard," the agency said.
Scott Segal, a lobbyist for refiners, praised EPA for avoiding “the retroactive rule-making favored by some biofuel lobbyists. That means no reopening of the 2016 RVO and no reallocations based on smaller-refinery exceptions. Had EPA gone in any other direction, it could have created profound due process and statutory problems harmful both to the regulated community and the integrity of the RFS itself."
Cellulosic biofuel production has grown modestly year to year, but volumes are still far behind those envisioned when the 2009 energy law expanded the Renewable Fuel Standard. At that time it was thought that large volumes of crop and wood waste might be converted into ethanol. But most of the cellulosic production projected for 2020, 525 million gallons, is actually compressed and liquid natural gas derived from biogas.
EPA expects to issue the final RVO rule this fall, which means it would be on time for the third consecutive year.
“Unlike the previous administration, we have consistently issued the annual renewable volume obligations rule on time, which is critically important to America’s farmers and all stakeholders impacted by the Renewable Fuel Standard program,” said EPA Administrator Andrew Wheeler.
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