WASHINGTON – The Environmental Protection Agency on Dec. 7 issued its long-awaited proposed Renewable Fuel Standard renewable volume obligations (RVOs) for refiners for 2022, 2021 and 2020. The proposed RVOs were panned by food processors who had urged the Biden administration to put a pause to further increases in the mandates out of concern about the price and availability of soybean oil, but mostly applauded by renewable fuel manufacturers and farm groups. The EPA sought public comment on the proposed RVOs that must be submitted by Feb. 4, 2022.
Separately, the EPA also will seek public comment on its proposed decision to deny petitions to exempt small refineries from their obligations under the RFS on the grounds that petitioners failed to show that the EPA has a basis under the Clean Air Act (CAA) and recent federal case law to approve them.
“Despite multiple challenging dynamics affecting the RFS program in recent years, EPA remains committed to the growth of biofuels in America as a critical strategy to secure a clean, zero-carbon energy future,” said Michael S. Regan, administrator at the EPA. “This package of actions will enable us to get the RFS program back in growth mode by setting ambitious levels for 2022, and by reinforcing the foundation of the program so that it’s rooted in science and the law.”
For 2022, the EPA proposed the highest RVOs ever, which the agency said put the program on “a stable trajectory that provides for significant growth.” The EPA noted the proposed total volume for 2022, at 20.77 billion gallons, is more than 3.5 billion gallons higher than the volume of renewable fuels used in 2020. The proposed volume of advanced biofuel for 2022, which includes renewable diesel, was more than 1 billion gallons greater than the volume used in 2020.
The EPA also proposed adding a 250-million-gallon “supplemental obligation” to the volumes proposed for 2022 and stated its intent to add another 250 million gallons in 2023. The agency said these additions would address the remand of the 2014-2016 annual rule by the DC Circuit Court of Appeals in Americans for Clean Energy v. EPA. The EPA said spreading this obligation over two years would provide the market time to respond to the supplemental obligation.
The EPA proposed 2021 volumes at the level that it projects the market will use by the end of the year. The agency said its proposal to revise the 2020 standards was to account for challenges the program and the market faced that year, including from the COVID-19 pandemic.
The EPA’s proposed action denying 65 pending applications for small refinery exemptions (SREs) responds to the decision from the US Court of Appeals for the Tenth Circuit in Renewable Fuels Association et al. v. EPA. That decision, issued in 2020, narrowed the situations in which the EPA may grant SREs. The EPA said it is sharing a proposed adjudication of pending SRE petitions that presents its approach in applying the direction from the Court. The proposed decision document articulates the agency’s updated interpretation of its Clean Air Act statutory authority to grant SREs, and the EPA’s analysis of the available data on RFS costs and market dynamics that compel the proposed denial.
Robb MacKie, president and chief executive officer of the American Bakers Association, said his association and other edible oil stakeholders were disappointed with the EPA announcement, particularly with its proposed mandated volume increases for biodiesel and advanced biofuel. The ABA and other edible oil stakeholders had urged the administration to pause the rate of growth of mandates for biodiesel.
“In the past several months, the combination of federal and state mandates, as well as tax credits, has led to a bidding war between biofuel producers and food producers such as bakers,” Mr. MacKie said. “An already extremely tight supply and demand situation for US soy oil would be exacerbated by the EPA’s RFS’s whopping 25% increase in advanced biofuel renewable volume obligations from 2020 to 2022.
“To be clear: the baking industry, which employs one of the largest trucking fleets in the country, supports renewable fuels and a green agenda as our members engage in sustainability initiatives to minimize their environmental footprints. However, with this EPA proposal, food makers who have been facing very tight supplies will struggle even more during this crisis as they seek to procure this ubiquitous ingredient at a fair and reliable price.”
Mr. MacKie asserted that the EPA, in its regulatory impact analysis of the proposed RVOs’s relating to food prices, used outdated data that significantly underestimated the impact on the consumer with regard to both a price and availability. He said, for example, the actual price for soybean oil for 2020-21 was 75% higher than the assumption used by the EPA. Further, he said, the updated price for soybean oil for 2021-22 was 91% higher than the EPA assumption.
“These underestimates on the impact to food prices will hurt the American consumer by implying a cumulative incremental soy oil cost to the consumer of nearly $8 billion over two years,” Mr. MacKie said.
“We are extremely disappointed that the EPA’s proposal missed an opportunity to provide immediate relief and ease the impacts of growing food inflation and supply concerns for American families, particularly impacting those Americans struggling with food security,” Mr. MacKie said. “We strongly urge the administration to use its authority and tools at their disposal to provide relief and resolve the supply chain crisis that’s harming so many food producers — and consumers.”
The Renewable Fuels Association said the EPA announcement, with the exception of the proposal to retroactively reduce 2020 RFS requirement, represented “a modest step in the right direction for the nation’s ethanol producers and farmers.”
The RFA said it welcomed EPA’s proposal to set the 2022 RFS conventional renewable fuel requirement (reflecting all but the advanced biofuel requirement) at the statutory volume of 15 billion gallons and its move to deny all pending small refinery exemption (SRE) petitions.
“Over the past four years, RFA has led the charge to stop the previous EPA’s illegal abuse of the small refinery waiver provision,” said Geoff Cooper, president and chief executive officer of the RFA. “We commend EPA Administrator Michael Regan and the Biden administration for denying all pending small refinery exemptions, and we are extremely pleased to see the agency shutting the floodgates on these destructive waivers. Under the previous administration, these exemptions destroyed demand for more than 4 billion gallons of renewable fuel, resulting in higher fuel prices for the consumer, increased greenhouse gas emissions, and lower farm income. Today’s announcement should finally put an end to the rampant abuse of the exemption program that we experienced under the last administration.”
The RFA’s principal complaint about the EPA announcement was the agency’s intent to revisit the 2020 RFS volumes.
“While we are pleased to see that EPA’s proposal for 2022 is consistent with congressional intent to require 15 billion gallons of conventional renewable fuels like corn ethanol, it would be completely unprecedented — and contrary to EPA’s past policies and practices — for the agency to go back in time and revise the 2020 RFS requirements. We don’t believe a retroactive reduction of this nature is legally permissible,” Mr. Cooper said. “The 2020 volumes were finalized nearly two years ago. Revising them now would undermine investment, create uncertainty, and go against EPA’s long-standing position that it does not have the authority to change RVOs once they are finalized.”