US EPA issues final RFS rule for 2021-’22, lowers most 2020 volumes, denies 69 more SREs

The U.S. EPA released June 3 its highly anticipated Renewable Fuel Standard final rule on renewable volume obligations (RVO) for 2021 and 2022 total renewable fuel, and advanced and cellulosic biofuels, as well as the 2022 RVO for biomass-based diesel.

As outlined in its proposal released in December, the agency is increasing 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.

On the other hand, however, the advanced biofuel final RVOs for 2021 and 2022 are lower than the December proposal, now set at 5.05 billion and 5.63 billion ethanol-equivalent gallons, respectively. In December, the agency proposed setting the 2021 and 2022 advanced biofuel RVOs at 5.2 billion and 5.77 billion gallons. EPA is also reducing the previously set 2020 advanced biofuel RVO from 5.09 billion to 4.63 billion gallons.

Furthermore, the agency is retroactively lowering total biofuel volumes for 2020 by nearly 3 billion gallons, from 20.09 billion gallons to 17.13 billion. The 2020 biobased diesel RVOs are unaffected by this retroactive move.

For 2021 and 2022, the agency is setting total biofuel RVOs at 18.84 billion (up from the proposal) and 20.63 billion gallons (down from the proposal), respectively.

Clean Fuels Alliance America welcomed the RVOs. “The final rule recognizes the continued growth of biodiesel, renewable diesel and other clean fuels and establishes readily achievable program obligations,” the organization stated.

Kurt Kovarik, vice president of federal affairs for Clean Fuels, said, “Clean Fuels and its members appreciate EPA Administrator Regan’s recognition that homegrown, clean fuels offer a better solution to high fuel prices stemming from high oil prices and supply shortages. We support EPA’s efforts to get the Renewable Fuel Standard back on track and to finalize 2022 volumes as a jumping off point for future growth. We stand ready to work with the agency to move forward and set volumes for 2023 and beyond. And we encourage the agency to quickly finalize new feedstocks pathways, such as that for canola oil.”

The Advanced Biofuels Association (ABFA) said the Biden administration “has missed an important opportunity to prioritize advanced low carbon fuels that will help America achieve its climate ambitions and support American energy independence” with this RVO final rule. “We were, however, pleased to see the regulations permitting the use of biointermediates finalized in this rule, enabling our members using these processes to participate in the RFS program and increasing the volumetric potential of the advanced biofuels industry now and in the years to come.”

ABFA continued, stating, “Fortunately, the administration will have a chance to strengthen the development of America’s low carbon fuel industry and broaden our national supply of renewable fuel sources by setting a more progressive path under the forthcoming ‘Set’ process. The ABFA strongly encourages EPA to provide certainty to the advanced biofuels industry by finalizing the volume standards for 2023 before the end of 2022. Completing this soon and setting the highest advanced volume obligations possible is critical to fully capturing the environmental, societal, and economic benefits of the RFS as Congress intended. Further, the agency should commit to the issuance of a more comprehensive proposal under the ‘Set’ process that can forge a stronger advanced biofuels future under the existing law for 2024 and beyond.”

EPA also established a 250-million-gallon “supplemental obligation” to the volumes finalized for 2022 and stated its intent to add another 250 million gallons in 2023, to address the remand of the 2014-’16 annual rule by the D.C. Circuit Court of Appeals in Americans for Clean Energy v. EPA.

The prepublication final RVO rule is available here.

EPA also proposed an alternative RIN retirement schedule for refineries to provide them with additional time and a broader range of RINs to comply with their 2020 RFS obligations. “EPA is proposing this alternative RIN retirement schedule because the agency has determined that there are extenuating circumstances specific to the 2020 compliance year, including a limited availability of RINs and the significant delay in EPA issuing its decisions on SRE petitions,” the agency stated. The proposed rule is available here.

EPA also announced the denial of 69 petitions from small refineries seeking small refinery exemptions (SREs) from RFS for compliance years 2016-’21.

“Consistent with the April 2022 Denial of Petitions for RFS Small Refinery Exemptions, the denials announced today apply EPA’s current interpretation of the Clean Air Act SRE provisions, consistent with a U.S. Court of Appeals for the Tenth Circuit holding in Renewable Fuels Association et al. v. EPA,” EPA stated. “The Tenth Circuit held that SREs may only be granted when a small refinery’s hardship is caused by compliance with the RFS program. After reviewing more than a decade of RFS market data, public comments on a proposal EPA issued in December, and confidential information submitted by petitioners, EPA concluded that none of the 69 SRE petitions demonstrated disproportionate economic hardship caused by compliance with the RFS program.”

The agency continued, stating, “Concurrent with today’s announcement, EPA is also supplementing the April 2022 Alternative RFS Compliance Demonstration Approach for Certain Small Refineries to allow three small refineries to apply the alternative compliance approach to their RFS compliance obligations for 2016 and 2017. All small refineries covered by the June 2022 Alternative RFS Compliance Demonstration Approach for Certain Small Refineries may meet certain 2016, 2017, and/or 2018 compliance obligations without purchasing or redeeming additional RFS credits. EPA is granting this compliance flexibility because the agency has determined that there are extenuating circumstances specific to this set of petitions, including the fact that SRE petitions were previously granted.”

Kovarik said, “EPA’s denial of pending small refinery exemptions for 2019 through 2021 assures our industry that the volumes set today will be fully met, even with compliance flexibilities. This is an important first step in restoring integrity to the program.”

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, which the Biden administration just retroactively lowered.