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  • Writer's pictureRon Kotrba

The Old One-Two

The legendary boxer Mike Tyson famously said, “Everybody has a plan until they get punched in the mouth.” The biobased diesel industry took that punch Dec. 1 when U.S. EPA finally released its “set” proposal for the Renewable Fuel Standard. When Congress passed the second iteration of RFS as part of the Energy Independence and Security Act of 2007, it included statutory volumes for conventional, advanced and cellulosic biofuels through 2022, but left biomass-based diesel volumes up to EPA’s discretion with certain guidance. From 2023 onward, EPA has much more latitude in administering all aspects of the program.

Heading into the RFS set process, hopes were high. Many U.S. renewable diesel projects came online in 2022, proving the buildout of this industry wasn’t mere conjecture—it was actually happening. Check out some of the news on page 11 and the story on Montana Renewables on page 30.

Then the punch came—punches really, as it was a vicious combination. For biobased diesel, EPA suggests moving from 2.76 billion gallons in 2022 to 2.82 billion gallons in 2023, 2.89 billion gallons in 2024 and 2.95 billion gallons in 2025. For advanced biofuels, the agency proposes moving from 5.63 billion ethanol-equivalent gallons (3.75 billion biodiesel-equivalent gallons) in 2022 to 5.82 billion gallons in 2023, 6.62 billion gallons in 2024 and 7.43 billion gallons in 2025.

While 7.43 billion gallons sounds like a lot, it’s not—for two reasons. One, remember, that’s ethanol-equivalent gallons, so in biodiesel-equivalent gallons, that’s 4.95 billion. Two, for 2025, EPA proposes to drastically increase the cellulosic biofuel subcategory within the advanced biofuels category to 2.13 billion ethanol-equivalent gallons. Although appreciable volumes of wood-based diesel that might qualify for this subcategory may come online by 2025, that’s not why EPA wants to spike cellulosic biofuel volumes. The agency is doing this to accommodate so-called eRINs for electric vehicles (EVs), manifesting the Biden administration’s clear and obvious bias toward EVs. When the proposed 2025 cellulosic volumes are subtracted from the proposed 2025 advanced biofuel volumes, and the remainder is converted to biodiesel-equivalent gallons, we are talking a little over 3.5 billion gallons—more than half a billion gallons less than the U.S.’s installed operable biodiesel and renewable diesel production capacity in 2022, not to mention hundreds of millions of gallons of qualifying imports and the billions of gallons of additional capacity that will be online in three years. To visualize how grossly undersized EPA’s volume proposals are, check out the simple but effective graphic on page 16 in the information section.

To put this all in perspective, just think about four large-scale projects by oil refiners or oil-refiner partnerships that are either online now or soon will be: Diamond Green Diesel’s facilities in Louisiana (690 mgy) and Texas (470 mgy), both of which are now operating; Phillips 66’s Rodeo, California, refinery conversion (800 mgy), scheduled for start-up in 2024; and the Marathon/Neste joint venture (730 mgy) in Martinez, California, planned for operations in 2023. Together, these four sites alone represent 2.69 billion gallons of annual capacity. If EPA’s proposal for the 2025 biomass-based diesel volumes becomes final, these four plants—if operated at capacity—could satisfy 91 percent of that year’s D4 RIN obligations, leaving dozens and dozens of other large- and small-scale renewable diesel and biodiesel producers across the country in the lurch to vie for the remaining 260 million gallons’ worth of crumbs in the RFS subcategory.

While ethanol stakeholders seemed pleased with the proposal, and virtually everyone appreciates the idea of rolling out volume obligations for multiple years to provide stability, biobased diesel advocates described the proposed volume requirements for 2023-’25 as “woeful,” “lackluster,” and “a missed opportunity.” Some even pointed out the obvious: The agency and its proposal are not keeping up with the rapid growth in renewable diesel production—let alone acting as a market-moving mechanism. Others went further. The American Soybean Association said, “These very insignificant volume increases for 2023-’25 realistically could not only stifle growth but also jeopardize the existing biofuels industry.”

The one-two punch of low biobased diesel volumes and soaring cellulosic biofuel volumes to accommodate Biden’s EV agenda is an astounding wakeup call for those who thought this industry’s troubles were over once the new administration took office. The electrification agenda is so ubiquitous it is even infiltrating what was clearly established 15 years ago as a liquid-fuels program. In the words of Geoff Moody, the senior vice president of government relations and policy for the American Fuel & Petrochemical Manufacturers organization, “[EPA] must also hold true to the legacy of RFS as a liquid-fuels program—not an electric-vehicle program—by rejecting yet another massive regulatory subsidy for electric-vehicle manufacturers.”

I have been a boxing fan even longer than I’ve been covering these industries, which is one reason why I used the Tyson quote to lead off this column. The biodiesel industry and its U.S. trade association Clean Fuels Alliance America (formerly the National Biodiesel Board) have long been said to punch above their weight class in terms of getting things done in Washington, D.C. Year after year, over decades, the association and its members have been able to surmount the insurmountable, forever the underdog to rise, not without surprise, to the occasion again and again.

The time to do this once again is here. Submit well-reasoned, informed, data-backed and impassioned comments to EPA during the open-comment period. The time is now*.

Less famously but just as astute, Tyson also said about his growing up, “My disadvantage was my advantage.” This seems just as true for the biobased diesel sector. Let’s convert these obstacles into opportunities and, yet again, turn this around.

*EPA closed the comment period Feb. 10.

Author: Ron Kotrba

Editor and Publisher

Biobased Diesel™


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