EPA offers nearly 14% increase for 2022 biomass-based diesel volumes in late RFS proposal

The U.S. EPA finally released its long-overdue proposed renewable volume obligations (RVO) for 2021 and 2022 total renewable fuel, and advanced and cellulosic biofuels, as well as the proposed 2022 RVO for biomass-based diesel, under the Renewable Fuel Standard. The agency proposes to increase the 2022 biomass-based diesel RVO from 2.43 billion gallons in 2021, which was set two years ago, to 2.76 billion gallons—an increase of 330 million gallons, or nearly 14 percent. It also proposes increasing the advanced biofuel RVOs for 2021 and 2022 to 5.2 billion and 5.77 billion ethanol-equivalent gallons, respectively.

The last time EPA issued RFS final-rule volumes was December 2019 when then-President Donald Trump’s EPA kept the 2021 biobased diesel volumes at 2.43 billion gallons, the same as in 2020. In that final rule, EPA slightly increased the 2020 advanced biofuel volume from its proposed 5.04 billion ethanol-equivalent gallons to 5.09 billion.

Now, the agency proposes lowering the total, advanced and cellulosic biofuel RVOs previously set for 2020 while leaving the biomass-based diesel volumes, which are statutorily supposed to be set more than a year in advance, alone. The EPA proposes to lower total biofuel volumes in 2020 by nearly 3 billion gallons, from 20.09 billion gallons to 17.13 billion gallons. It is also proposing to reduce the previously set 2020 advanced biofuel RVO from 5.09 billion to 4.63 billion gallons. For 2021 and 2022, the agency proposes total biofuel RVOs to be 18.52 billion and 20.77 billion gallons, respectively.

In addition, EPA is proposing to address the remand of the 2014-’16 annual rule by the D.C. Circuit Court of Appeals in the Americans for Clean Energy case. The agency is offering the idea of a supplemental volume of 250 million gallons in 2022, “and we intend to propose an additional supplemental volume of 250 million gallons for 2023 in a subsequent action plan,” it stated.

The agency is also proposing denial of more than 60 pending small refinery exemptions (SREs), which had decimated biofuel demand under former Trump administration EPA administrators Scott Pruitt and Andrew Wheeler.

EPA also plans to revive the Renewables Enhancement and Growth Support proposal from 2016 to allow for the production, transfer, and use of bio-intermediates to generate qualifying fuel under the RFS program. “Due to the elapsed time since the proposed REGS rule and our continued consideration of how to most effectively allow bio-intermediates into the program, we are proposing [new] provisions to allow for the use of bio-intermediates to produce qualifying renewable fuels,” the agency stated. “Consistent with what we previously proposed in the REGS rule, these provisions specify requirements that apply when renewable fuel is produced through sequential operations at more than one facility. These provisions center around the production, transfer, and use of bio-intermediates and the creation of new regulatory requirements related to registration, recordkeeping, and reporting for facilities producing or using a bio-intermediate for renewable fuel production. We are reproposing many of the proposed bio-intermediate provisions from the REGS rule without significant changes, making significant changes to some of the previously proposed provisions, and proposing some provisions for the first time here.”

Other proposals include modifying the biomass-based diesel weighting factor from 1.5 to 1.55, as well as changes in registration for baseline volumes, attest engagements for parties owning RINs, treatment of confidential business information, and more. For additional information, click here.

“EPA’s rule provides some growth for advanced biofuels in 2022 and we hope puts an end to the demand destruction that resulted from unwarranted small refinery exemptions,” said Kurt Kovarik, vice president of federal affairs for the National Biodiesel Board. “The long delay in setting 2021 volumes is a missed opportunity. Moreover, EPA is setting a bad precedent by recalculating the 2020 obligations. The retroactive lowering of volumes creates uncertainty about future growth.”

Monty Shaw, executive director of the Iowa Renewable Fuels Association, is also concerned about the lowering of 2020 volumes that had been set previously. “The proposed rule from the Biden EPA falls woefully short of any attempt to leverage domestic biofuels to help lower fuel prices and carbon emissions,” he said. “We also have serious concerns it likely violates the RFS law, especially with regard to the 2020 actions. Why on Earth should the United States be asking OPEC for more oil and releasing our strategic petroleum reserves while at the same time proposing to undermine the one and only law on the federal books that seeks to expand domestic fuel supplies that reduce carbon emissions? We urge President Biden to step in and provide a course correction to his EPA in order to realign this proposed rule with his commitments to Iowa voters.”

According to NBB, the U.S. market for biodiesel and renewable diesel in 2020 was 3 billion gallons, and through the first 10 months of 2021 domestic production maintained a stable manufacturing rate comparable to 2020. “EPA is proposing sustainable growth opportunities consistent with industry expectations along with a statutorily required increase of 500 million gallons in the overall advanced biofuel category,” the organization stated.

Shaw recognized the news was better for the biobased diesel sector than others like ethanol. “We appreciate the proposed rule recognizes the growth occurring in the biodiesel and renewable diesel markets,” he said. “We need to ensure the final rule keeps up with the increased production capacity that is coming online.”

EPA provides no guidance in its proposal on 2023 biomass-based diesel volumes, which were due Nov. 30. Public comment on the proposed RFS rule is open through Feb. 4.

Biobased Diesel Daily reached out to several biobased diesel producers and industry stakeholders for comment. Bob King, founder and president of Hawaii-based Pacific Biodiesel, said he was glad to see all the volumes for 2022 going up, not down. “There were some who thought the volumes would be reduced, which would have been very bad,” King said. “Still the industry has more capacity available. It seems the RVO will at least keep the industry from going backwards, which is good news.”

Pete Moss, president of Frazier, Barnes & Associates, said, “The existing production capabilities and plans for increased biomass-based diesel capacity suggest that much higher RVO targets are not only achievable, but necessary for the economy and the environment. The agricultural community and broader public are seeking cleaner fuels and relief at the pump, which could be achieved with more aggressive RVOs.”

Consistency from EPA is important, said Paul Nazzaro, president of Advanced Fuel Solutions Inc. and supply-chain liaison for NBB. “To ensure the supply chain at large continues to prepare their strategically positioned assets to accommodate biodiesel, renewable diesel and sustainable aviation fuel growth, the RVO must remain strong and reliable as it is a critical element for the renewable fuels industries’ success,” he said. “Albeit these low-carbon fuels offer boundless value to liquid-fuel handlers, they also require drivers be put in place to complement their commitment to transition from fossil fuels to low-carbon options.”

Other initial reactions from industry players were “cautiously optimistic,” although several sources said they needed additional time to digest the numbers and provide more thoughtful feedback.