RFS: Slight Boost in Cellulosic, Advanced Biofuel for 2020; Other Levels Unchanged

Posted on 07/05/2019 1:24 PM

EPA proposes little change for targets for 2020 biofuel and 2021 biomass-based biodiesel under Renewable Fuel Standard (RFS)

 

EPA is proposing the following levels (link for proposed rule; link for EPA release):

 

Item

2019 Final

2020 Statutory Volumes

2020 Proposed Volumes

2021 Proposed Volumes

Cellulosic Biofuel (bil. gal.)

0.42

10.50

0.54

N/A

Biomass-Based Biodiesel (bil. gal.)

2.1

Greater than 1.0

N/A

2.43

Advanced Biofuel (bil. gal.)

4.92

15.00

5.04

N/A

Conventional Biofuel (bil. gal.)

15.0

15.0

15.0

N/A

Renewable Fuel (bil. gal.)

19.92

30.0

20.04

N/A

NOTE: All values are ethanol equivalent on an energy content basis, except for biomass-based biodiesel which is biodiesel equivalent.

 

Compared to 2019 levels for biofuel, the only adjustment is for cellulosic and advanced biofuel, with cellulosic ethanol increased 120 million gallons and that also resulted in a 120-million-gallon increase for advanced biofuel as cellulosic ethanol is a component of advanced biofuel. “This entire increase for each category is attributable to increased projection of cellulosic biofuel production in 2020,” EPA said in a draft version of the proposed rule.

 

As for the advanced biofuel level, EPA said they “investigated the projected availability of non-cellulosic advanced biofuels in 2020.” Several factors went into the level proposed, including, “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 2020, the tariffs on imports of biodiesel from Argentina and Indonesia, as well as the cost of advanced biofuels.”

 

There is no change proposed for the conventional biofuel — primarily corn-based ethanol — as that remains at 15.0 billion gallons. But the total renewable fuel level is proposed at 20.04 billion gallons, up 120 million – a reflection of the increase for cellulosic ethanol.

 

For 2021, EPA is proposing a biomass-based biodiesel (BBD) level of 2.43 billion gallons, the same level as the final 2020 mark. “We believe that this volume appropriately balances the factors set forth in the statute,” EPA said. “Most notably, in recent years, the advanced biofuel volume requirement has driven 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.” EPA said they also view it as appropriate to “maintain the opportunity for other advanced biofuels to compete for market share, potentially reducing the costs associated with the advanced biofuel volume in future years by maintaining this flexibility, and thus to establish the BBD volume at a level lower than the advanced biofuel volume.”

 

In its discussion on BBD, EPA also noted the imposition of import duties on biodiesel from Argentina and Indonesia. Energy Information Administration (EIA) data showed that no biodiesel was imported those countries since September 2017 due to preliminary import tariffs on biodiesel from those countries announced in August 2017. “As a result of these tariffs, total imports of biodiesel into the US were significantly lower in 2018 than they had been in 2016 and 2017,” EPA stated “The decrease in imported biodiesel did not, however, result in a decrease in the volume of advanced biodiesel and renewable diesel supplied to the US in 2018. Instead, higher domestic production of advanced biodiesel and renewable diesel, in combination with lower exported volumes of domestically produced biodiesel, resulted in an overall increase in the volume of advanced biodiesel and renewable diesel supplied in 2018.”

 

As for why EPA did not increase the BBD levels due to the China trade dispute, the agency commented as they did in the 2019 final rule, “we did not include the potential biodiesel or renewable diesel that could theoretically be produced from the oilseeds and vegetable oil projected to remain in the U.S. due to reduced trade of these products in our projection of the reasonably attainable volumes.” EPA’s reasoning again is that “any biodiesel and renewable diesel produced from soybeans previously exported to China are necessarily diverted from other uses (even if the reason for this diversion is the tariffs, rather than the RFS program), and biodiesel produced from these diverted feedstocks is therefore more likely to have the adverse unintended effects as previously discussed.”

 

EPA is also proposing percentage standards under the RFS that correspond to the four separate renewable fuel categories as follows:

 

Area

Proposed Percentage Standards

Cellulosic Biofuel

0.29%

Biomass-Based Biodiesel

1.99%

Advanced Biofuel

2.75%

Renewable Fuel

10.92%

 

The percentage standards represent the ratio of the national applicable renewable fuel volume to the national projected non-renewable gasoline and diesel volume, EPA said, “less any gasoline and diesel production attributable to small refineries granted an exemption prior to the date that the standards are set.” The volume of transportation gasoline and diesel used to calculate the proposed percentage standards was based on Energy Information Administration’s (EIA) April 2019 Short Term Energy Outlook (STEO), minus an estimate of fuel consumption in Alaska.

 

The reset of the RFS is indeed on a separate track, EPA confirmed. The reset is ordered under the RFS if EPA waives statutory volume targets beyond specified thresholds. The final 2019 RFS levels met that condition, EPA noted. “EPA intends to fulfill these requirements in a separate rulemaking,” the agency noted.

 

While EPA has used its cellulosic waiver authority, the agency again stated that they do not believe that conditions exist to justify using a general waiver authority. The general waiver authority allows EPA, in consult with USDA, to waive applicable RFS volumes based on a petition from states or private parties or by the EPA administrator. “Such a waiver must be based on a determination by the Administrator, after public notice and opportunity for comment that: (1) implementation of the requirement would severely harm the economy or the environment of a State, a region, or the United States; or (2) there is an inadequate domestic supply,” EPA said. “At this time, we do not believe that the circumstances exist that would justify further reductions in the volumes using the general waiver authority.”

 

However, in a widely expected move that will anger biofuel backers, EPA said they again were not reallocating any biofuel levels due to small refiner exemptions (SREs). As they did for 2019, EPA stated in the current proposed rule that “at this time no exemptions have been approved for 2020, and therefore we have calculated the percentage standards for 2020 without any adjustment for exempted volumes. We are maintaining our approach that any exemptions for 2020 that are granted after the final rule is released will not be reflected in the percentage standards that apply to all gasoline and diesel produced or imported in 2020.”

 

EPA also proposes several changes to the RFS as part of the Renewables Enhancement and Growth Support (REGS) rule in 2016. EPA said that “several” of the proposed changes under the REGS plan could be finalized in this 2020 Renewable Volume Obligations (RVO) for 2020. EPA said they are considering finalizing the following:

 

  • Allowing Production of Biomass-Based Diesel From Separated Food Waste (REGS Section VIII.C)
  • Flexibilities for Renewable Fuel Blending for Military Use (REGS Section VIII.E)
  • Heating Oil Used for Cooling (REGS Section VIII.F)
  • Separated Food Waste Plans (REGS Section VIII.G)
  • RFS Facility Ownership Changes (REGS Section VIII.H)
  • Additional Registration Deactivation Justifications (REGS Section VIII.J)
  • New Pathway for Co-Processing Biomass With Petroleum To Produce Cellulosic Diesel, Jet Fuel, and Heating Oil (REGS Section VIII.M)
  • Public Access to Information (REGS Section VIII.O)
  • Redesignation of Renewable Fuel on a PTD for Non-Qualifying Uses (REGS Section VIII.R)
  • Other Revisions to the Fuels Program (REGS Section IX)  

 

The public access to information relates to a proposal that EPA had signaled in April that it wanted further public comment on relative to basic information related SREs could not be claimed as being confidential business information (CBI). However, EPA never did publish the plan in the Federal Register but is now including it as a proposed reform under the 2020 RVO proposal.

 

EPA was also required to go back and reexamine their 2016 RFS levels based on a court challenge. EPA said based on their analysis of the situation, they were sticking with the 2016 levels that had been finalized.

 

There are no major surprises in the proposed levels from EPA for 2020 biofuels and 2021 biodiesel. The proposed levels indicate that neither biofuel backers or biodiesel interests had any success in convincing the agency to increase levels for BBD or for conventional biofuels. And, it indicates EPA is once again not willing to reallocate any of the biofuel levels that are exempted for small refiners. But the agency also did not make any reductions in the levels nor did they signal they would use their general waiver authority to reduce over levels or specific marks within the RFS except for the cellulosic and advanced biofuel levels. And, the agency confirmed that the RFS reset – still under review at the Office of Management and Budget (OMB) — will be finalized on a separate track from the 2020 biofuel and 2021 biodiesel levels.

 

Factors ahead that could come into play for the final 2020 biofuel and 2021 biodiesel levels include, but are not limited to, any reduction in the import duties on biodiesel from Argentina as the Commerce Department has determined in a preliminary ruling that is expected to be finalized in September, and any potential return of the biodiesel tax credit. But those two are not certain at this point, so their impact would not be seen until EPA finalizes the plans for 2020 biofuel and 2021 biodiesel.

 

As for the CBI information under EPA’s REGS proposal, the reopening of comments on that provision came due to pushback from refining interests, contacts advise. The response from the refining industry on including that proposal in this round of rulemaking should bear out that they are not in favor of releasing additional information on firms that are granted SREs.


 

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