Back on Track: EPA issues on-time, robust Renewable Fuel Standard volumes for 2017-18

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In Washington, the US Environmental Protection Agency released the 2017 renewable fuel volume obligations (and the 2018 volume obligations for biomass-based diesel), with a strong push beyond what has been termed the “blend wall” and stimulating refiners to implement more “cost-effective changes at their refineries to blend more renewable fuel.”

The agency finalized a total renewable fuel volume of 19.28 billion gallons, of which 4.28 BG is advanced biofuel and 311 million gallons is cellulosic biofuel. Thus, the implied RVO for conventional biofuels like corn ethanol will be 15BG—up from the 14.8 BG proposed in May.

“Renewable fuel volumes continue to increase across the board compared to 2016 levels,” said Janet McCabe, the agency’s acting assistant administrator for the Office of Air and Radiation. “These final standards will boost production, providing for ambitious yet achievable growth of biofuels in the transportation sector. By implementing the program enacted by Congress, we are expanding the nation’s renewable fuels sector while reducing our reliance on imported oil.”

The Top Line Numbers

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Breaking the Blend Wall

The key? The EPA has essentially abandoned its previous attempt to slow the adoption of renewable fuel by citing the oil industry’s lack of infrastructure-building as a “supply constraint”. Under the Clean Air Act, the EPA has authority to waive down Congressionally-targeted volumes in the case of supply constraints, which members of Congress said they intended to mean a lack of renewable fuel production, rather than a lack of infrastructure deployed by refiners to distribute renewable fuel.

Renewable fuel producers had contended that should refiners have the ability to stall deployment of renewable fuels by not deploying infrastructure, obligated parties would have gained veto power over the Clean Air Act and Congress.

Biomass-based diesel numbers still below industry capacity

Under the new RFS rule, Biomass-Based Diesel standards would move to 2.1 billion gallons in 2018 up from 2 billion gallons in 2017. The Biomass-Based Diesel category – a diesel subset of the overall Advanced Biofuel category – is made up of biodiesel and renewable diesel, another diesel alternative made from the same feedstocks using a different technology.

The new standards reflect modest growth in the standards but remain below the more than 2.6 billion gallons of biodiesel and renewable hydrocarbon diesel expected in 2016.

Figures substantially boosted from original proposal

The EPA substantially boosted volumes from the original proposals issued earlier in the year. They were:

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Cellulosic fuels were essentially flat from the original proposal, but advanced biofuels were boosted nearly 300 million gallons and, overall, renewable fuel obligations were boosted 448 million gallons.

Reaction from the Stakeholders

Advanced Biofuels Association

Michael McAdams, ABFA President:
“We congratulate EPA on getting the RVO rule out ahead of schedule. Like last year, it sends a clear signal to the market of the federal government’s intention to stand behind the RFS program. We are also happy to see the confidence and support of the biomass-based diesel pool by continuing to recognize the fact it is growing steadily. And, we welcome increases in both the advanced and cellulosic pools. Those are truly the fuels of the future that deliver the most significant contribution to sustainability.”

Biotechnology Innovation Organization (BIO)

Brent Erickson, executive vice president of BIO’s Industrial & Environmental Section:
“By abandoning its legally flawed reliance on general waiver authority as a basis for departing from statutory biofuels volumes requirements, EPA has sent a strong signal that it will support the biofuels industry and grow advanced and cellulosic biofuel production. BIO and its members welcome this change in course by EPA; today’s rule adheres to Congress’s intent in enacting the RFS statute and ends several years of instability in the RFS program.” Read More

National Biodiesel Board

NBB CEO Donnell Rehagen
“The real winners with this announcement are American consumers who will now have access to even more cleaner burning, advanced biofuels. These benefits extend far beyond the biodiesel industry, supporting high paying jobs and clean air across the nation. Though we are poised to top these numbers this year, growth in advanced biofuels still sends positive signals to the marketplace.”

“While NBB applauds the increased volumes, there is room for more aggressive growth. The U.S. biodiesel industry can do more. The production capacity and feedstock are clearly available as the market is already topping these levels. We will work with the incoming Administration to help them understand the benefits provided by our growing domestic biodiesel industry and the potential to support additional jobs and investment in rural economies.”

Advanced Biofuels Business Council

Brooke Coleman, Executive Director
“Administrator McCarthy and her team deserve a lot of credit. Administrator McCarthy said they would get the RFS back on track and they did. It’s a strong rule across the board and moves the conversation forward. We have moved past the imaginary blend wall. The biofuels industry continues to innovate. The merchant refiners saying they cannot comply with the RFS are now implementing cost-effective changes at their refineries to blend more renewable fuel. President-elect Trump will no doubt hear from a shrinking group of RFS naysayers, but I think he understands that the RFS is working, supports a strong manufacturing base across the country and reduces our dependence on foreign oil. We are looking forward to working with EPA and the next Administration on further accelerating the commercial deployment of advanced biofuels.” Read More

Renewable Fuels Association (RFA)

Bob Dinneen, President and CEO
“We can all be thankful EPA has raised the conventional biofuel requirement to the 15 billion gallon level required by the statute. The move will send a positive signal to investors, rippling throughout our economy and environment. By signaling its commitment to a growing biofuels market, the agency will stimulate new interest in cellulosic ethanol and other advanced biofuels, drive investment in infrastructure to accommodate E15 and higher ethanol blends, and make a further dent in reducing greenhouse gas emissions.” Read More

Growth Energy

Emily Skor, CEO:
“We are pleased that the EPA’s rule finally achieves the statutory volume for conventional biofuel as called for by Congress. The Renewable Fuel Standard is our country’s most successful energy policy. It continues to inject much needed competition and consumer choice into the vehicle fuels marketplace. It enables greater consumer adoption of cleaner biofuels that displace toxic emissions and reduce harmful emissions, while creating American jobs, spurring innovation and lowering the price at the pump.” Read More

American Coalition for Ethanol (ACE)

Brian Jennings, Executive Vice President
“As more ethanol was blended with record-high consumption of gasoline this year, ACE urged EPA to increase the 2017 implied conventional biofuel volume to the statutory level of 15 billion gallons and we are very pleased EPA has agreed to do so. For the last couple of years, EPA has unfortunately sided with oil companies and refiners instead of rural voters to ‘ride the brakes’ on RFS blending volumes, relying on excuses such as the make-believe E10 ‘blend wall’ and lower gasoline use to reduce renewable fuel use below statutory levels. But we are supportive of the move to increase volumes for 2017 without a ‘blend wall’ excuse.  U.S. gasoline use is expected to rise again in 2017, so increasing RFS volumes will help restore some confidence to the rural economy and reassure retailers that it makes sense to offer E15 and flex fuels like E30 and E85 to their customers.”

“Nevertheless, we remain opposed to EPA’s misapplication of the RFS general waiver authority to use ‘infrastructure constraints’ as an excuse to limit renewable fuel use below statutory levels for 2014, 2015, and 2016, which is why we are party to Americans for Clean Energy et al. vs EPA, a lawsuit pending in the U.S. Court of Appeals for D.C.  We look forward to the Court taking up our case early in 2017 and deciding in our favor.”

National Corn Growers Association

Wesley Spurlock, farmer and President:
“Today the EPA moved in the right direction by increasing the 2017 ethanol volume to statute. This is critical for farmers facing difficult economic times, as well as for consumers who care about clean air, affordable fuel choices, and lowering our dependence on foreign oil.” Read More

Renewable Energy Group

Daniel Oh, CEO
“While our industry has shown that higher volumes of biomass-based diesel can and will be produced and consumed, this final rule elevates the growth trajectory for our cleaner, lower carbon intensity advanced biofuel,” said Daniel J. Oh, President and Chief Executive Officer.  “Biomass-based diesel will continue to lead the way.  We appreciate the support of those at the EPA, many others throughout the Administration and our bi-partisan champions on Capitol Hill who all helped make this possible.”

Novozymes

Adam Monroe, President, Americas
“Since its inception, the RFS has created more than 357,000 good-paying American jobs that can’t be outsourced. These workers, and the biofuel they produce, have helped us all breathe easier by reducing toxic emissions and protecting people’s health. They’ve also led America to a resurgence in American manufacturing, reducing our dependence on foreign oil. The RFS is a key reason America is achieving its economic, health and climate goals.”

“Novozymes has 1,200 employees in the United States and has invested hundreds of millions of dollars in biofuel technology development, putting scientists to work finding ways to turn biomass into biofuel, and building facilities like our $200 million enzyme manufacturing plant in Blair, Nebraska. We made these investments because the Renewable Fuel Standard is strong, stable and clear. With today’s decision, it remains that way.”

POET

Jeff Broin, CEO:
“The grain ethanol industry is ready and able to meet its obligation under the Renewable Fuel Standard, and today’s rule from the EPA reflects that reality. I commend the EPA on holding firm to the letter of the law despite enormous pressure from oil interests. These numbers reflect the intent of Congress in making homegrown, renewable biofuels a sizable portion of our transportation fuel supply.”  Read More

The Bottom Line

With the proposal, the EPA ensured that only one turkey will be on the table this Thanksgiving — the actual Thanksgiving Day turkey, and no evidence of an RFS turkey in sight.