There was likely some forethought behind the EPA’s release of its final biofuel blending obligations on what would be expected to be a low-profile news day – the Friday after Thursday’s Fourth of July. But the reaction across the sector was loud and unhappy, and that discontent will reverberate for weeks, if not months.
The EPA’s proposed Renewable Volume Obligations (RVOs) – blending targets set under the Renewable Fuels Standard (RFS) for most biofuels next year and for biodiesel in 2021 fails to recognize the sector’s increased production capabilities. But more critically, the proposal also reneges on a promise to restore huge amounts of ethanol and biodiesel lost to questionable “hardship” waivers from RFS obligations being granted to refiners by the agency in unprecedented numbers under the Trump administration.
While the waivers are applicable to “small” refiners with a throughput of less than 75,000 barrels per day, many of those facilities are owned by multi-billion-dollar oil giants like Chevron, CVR, ExxonMobil, HollyFrontier, Marathon, Phillips 66, and Valero. Ethanol and biodiesel producers are justifiably slamming the latest agency RVO rule for its failure to take into account the millions of dollars in revenues lost due to the unprecedented flurry of hardship waivers that have been handed down under the Trump administration.
The EPA, which traditionally grants waivers retroactively to previous years, issued six waivers for 2015, a number that rose under the Trump administration to 19 for 2016, 34 for 2017 and, as of mid-March, 37 for 2018. The industry has claimed in court filings that the exemptions have cost biofuel producers hundreds of millions of dollars in lost demand.
Under the rule released Friday, at least 20.04 billion gallons of biofuels, including ethanol and biodiesel, would be required in 2020, up from 19.92 billion gallons this year. The increase is entirely attributable to the 122 million gallons allocated by the agency to cellulosic biofuels. The RVOs for 2020 include 5.04 billion gallons of advanced biofuels, which take in the higher cellulosic ethanol amount as well as biomass-based diesel. The conventional corn ethanol requirement stands at 15 billion gallons.
The agency fixed the biodiesel RVO, which is set for a year ahead of other regulated biofuels, at 2.43 billion gallons, the same as it was set last year for 2020. Biomass-based diesel includes biodiesel, typically made from soybean oil, and renewable diesel is a form that is chemically similar to petroleum diesel.
The biodiesel sector, which had requested 2.8 billion gallons for next year, had a justifiably harsh reaction, with industry leaders arguing the amounts allocated will flatline the industry’s growth. And because EPA does not take into account small refinery exemptions granted to biodiesel blenders, the agency reduces the fuel’s market space, hurting biodiesel producers and the soybean growers who supply much of the fuel’s source feedstock.
In setting the new RVOs, the EPA has ignored the directions Congress gave the agency when the RFS was created 14 years ago to ensure that the statutory RFS volumes are enforced. No effort has been made to include prospective volumes that can be reallocated to non-exempt blenders. Instead, EPA has chosen to continue a practice that is destroying demand, hurting both biofuel producers, the farmers who supply the biofuel industry, and the rural communities that are supported by farm revenues that have taken big hits in recent years.
Nor has the EPA provided the industry or the public with any information regarding how it assesses small refinery exemption petitions – it has resisted release of almost all information regarding the recent exemptions that have been granted. Lawsuits have been brought by the ethanol industry in federal court in an effort to bring some light to the agency’s process. And bipartisan legislation has been introduced in both houses of Congress that would shed more light on the waiver-granting process.
The latest RVO rule is only going to rachet up the pressure on the agency and the Trump administration from stakeholders and the friends of the biofuels industry in Congress. Solutions from the Land joins those seeking a thorough explanation of a waiver-granting process that is, at best, questionable. Policy makers would do well to give the renewable fuels this nation produces every opportunity to contribute to a cleaner environment as well as the lower carbon energy solutions the world so desperately needs.
