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By Lynn L. Bergeson and Carla N. Hutton
 
On December 2, 2022, the U.S. Environmental Protection Agency (EPA) published a final rule determining that renewable diesel, jet fuel, heating oil, naphtha, and liquefied petroleum gas (LPG) produced from canola/rapeseed oil via a hydrotreating process all meet the lifecycle greenhouse gas (GHG) emissions reduction threshold of 50 percent required for advanced biofuels and biomass-based diesel (BBD) under the Renewable Fuel Standard (RFS) program. 87 Fed. Reg. 73956. EPA states that based on the analyses described in the earlier notice of proposed rulemaking associated with this action, it is adding these pathways to the list of approved pathways in the RFS regulations, making them eligible to generate Renewable Identification Numbers (RIN), provided they satisfy the other definitional and RIN generation criteria for renewable fuel specified in the RFS regulations. EPA also amended the RFS regulations by adding a new definition of “canola/rapeseed oil.” The final rule was effective on January 3, 2023.

Tags: RFS, GHG, Biofuel, BBD

 

By Lynn L. Bergeson and Carla N. Hutton
 
On January 3, 2023, the U.S. Environmental Protection Agency (EPA) announced the release of a draft document entitled Biofuels and the Environment: Third Triennial Report to Congress (External Review Draft) for public comment. 88 Fed. Reg. 72. EPA’s Office of Research and Development (ORD) and Office of Air and Radiation (OAR), in consultation with the U.S. Departments of Agriculture (USDA) and Energy (DOE), prepared the document. The draft report is responsive to Section 204 of the 2007 Energy Independence and Security Act (EISA). The purpose of the report is to examine the effects of the Renewable Fuel Standard (RFS) Program on the environment, including the impacts to date and likely future impacts to the nation’s air, land, and water resources. It focuses on the dominant biofuel sources in the United States: (1) domestic corn ethanol from corn starch; (2) domestic biodiesel from soybean oil; (3) domestic biodiesel from fats, oils, and greases (FOG); and (4) imported ethanol from Brazilian sugarcane. The draft report concludes that the RFS Program likely played a relatively minor role (0-0.4 billion gallons per year) in the growth of corn ethanol in the United States from 2002-2012 and may have played a more important role (0-2.1 billion gallons per year) since 2013. According to the draft report, the more prominent role of the RFS Program on corn ethanol production in the United States in more recent years is consistent with the methyl-tert-butyl-ether (MTBE) phaseout by 2006, expiration of the Volumetric Ethanol Excise Tax Credit (VEETC) at the end of 2010, and lower oil prices after 2015. For biodiesel and renewable diesel, which may be produced from a variety of feedstocks (e.g., soybean, FOGs), the draft report states that the conclusion on the attributional effect of the RFS Program is different. There is evidence that the RFS Program has driven a significant portion of the use of these biofuels since 2010; there is insufficient information available to quantify the attributional effect of the RFS Program, however. The draft report notes that despite the finding of relatively modest effects of the RFS Program nationally for the environmental impacts assessed, these may have important cumulative impacts on the environment. The draft report states that international effects associated with imported biofuels are even more uncertain than national effects but are likely modest as well given the relatively small quantity of imports relative to domestic biofuel production since the RFS Program went into effect.
 
The draft report reinforces the broad conclusions from the first and second Reports to Congress on biofuels in general and further evaluates attribution of those effects to the RFS Program more specifically. According to the draft report, biofuels continue to have the potential for both positive and negative environmental effects, depending on the many factors identified in the report. The draft report notes that at the time of writing, the likely future effects of the RFS Program are highly uncertain. The first and second Reports to Congress “had the benefit of statutory biofuel volumes established by EISA as a guideline for the likely future,” but these statutory volumes ended in 2022. EPA continues to work on issuing final annual biofuel standards under the RFS Program for future years. These standards are critical to estimating accurately the likely future effects of the RFS Program. Since these final standards for future years are not yet available, they are not included in this report. The draft report notes that several other factors contribute to additional uncertainty, including ongoing recovery from the global COVID-19 pandemic, uncertainty in the penetration of E15 in the marketplace, competition with other technologies such as electric vehicles, and continued but slow growth of cellulosic ethanol production from agricultural or marginal lands. As policy and market conditions change, so may the factors to consider and the estimate of the likely future effects of the RFS Program.
 
EPA states that it is releasing the draft document to seek review by a contractor-led peer review panel. EPA will post the external peer review panel, peer review meeting dates, and registration information on its website. Comments on the draft report are due March 6, 2023.

Tags: Biofuel, RFS

 

By Lynn L. Bergeson and Carla N. Hutton
 
On December 1, 2022, the U.S. Environmental Protection Agency (EPA) announced a multi-part proposal that will build on the Renewable Fuel Standard (RFS) program and seek to advance the priorities of energy security, less pollution, and consumer protection. The RFS “Set” proposal requests public input on required volumes of biofuel for the next one to three years and on a series of modifications intended to strengthen and expand the program. EPA states that this proposal includes steady growth of biofuels for use in the nation’s fuel supply for 2023, 2024, and 2025. EPA notes that because the Energy Independence and Security Act of 2007 (EISA) does not include volumes after 2022, this is the first time that EPA is setting these proposed biofuel volume targets without using those outlined in statute. According to EPA, when setting biofuel volumes for years after 2022, EPA must consider a variety of factors specified in the statute, including costs, air quality, climate change, implementation of the program to date, energy security, infrastructure issues, commodity prices, and water quality and supply.
 
EPA is seeking comment on the proposed volumes and how to balance appropriately these factors so that the program works for renewable fuel growers and producers, refiners and the union workers who operate these facilities, and fuel consumers. According to EPA, because the rule is an opportunity to take a “fresh look” at many aspects of the program, EPA is also seeking comment on how the rule can intersect with continued viability of domestic oil refining assets, including merchant refineries, how best to support novel fuels like sustainable aviation fuels and clean hydrogen, and how to account for the new and updated incentives in the Inflation Reduction Act.
 
EPA will also propose new regulations governing the generation of qualifying renewable electricity made from renewable biomass that is used for transportation fuel in electric vehicles. EPA seeks comment on this new component of the RFS program that would tie electricity generation from renewable biomass into the program for the first time. EPA has posted a pre-publication version of the proposed rule. Comments on the proposed rule are due February 10, 2023.
 
EPA will hold a virtual public hearing on January 10, 2023, on its proposed rule. 87 Fed. Reg. 76194. If necessary, EPA will hold an additional session on January 11, 2023. EPA asks that all attendees register by January 3, 2023.

Tags: RFS, Biofuel

 

By Lynn L. Bergeson and Carla N. Hutton
 
The U.S. Government Accountability Office (GAO) published a report on November 3, 2022, entitled Renewable Fuel Standard: Actions Needed to Improve Decision-Making in the Small Refinery Exemption Program. The Renewable Fuel Standard (RFS) requires that gasoline and diesel fuels be blended with a minimum volume of renewable fuel. Small refineries can petition the U.S. Environmental Protection Agency (EPA) annually for an exemption from their RFS obligations based on disproportionate economic hardship. EPA must evaluate small refinery exemption petitions in consultation with the Department of Energy (DOE). Congressional requesters asked GAO to review issues related to EPA’s and DOE’s implementation of the small refinery exemption program. GAO examined the information, policies, and procedures EPA and DOE use to make decisions about exemptions and the extent to which exemption decisions are timely. GAO analyzed data and documents related to exemptions from 2013 through 2021 and interviewed agency officials and industry stakeholders.
 
According to GAO, EPA does not have assurance that its decisions about small refinery exemptions under the RFS are based on valid information. In addition, EPA and DOE do not have policies and procedures specifying how they are to consult about and make exemption decisions.

  • Information. Small refinery exemption decisions for compliance years 2019 through 2021 were based on an EPA conclusion that small refineries do not experience disproportionate economic hardship from the RFS. GAO states that this conclusion relies on a potentially flawed assumption -- that all parties pay and receive one price for the tradable credits used to demonstrate compliance with the RFS. GAO found that EPA has not analyzed whether this assumption is valid. GAO’s analysis showed that small refineries have paid more on average for compliance credits than have large refineries. Without reassessing its conclusion, EPA does not have assurance that its small refinery exemption decisions are based on valid information.
     
  • Policies and procedures. According to GAO, EPA has generally documented its decisions. EPA has no policies or procedures for how it assesses petitions and makes exemption decisions, however. Similarly, DOE does not have policies or procedures for how it provides consultation to EPA. GAO states that administration of the program has been inconsistent, and the number of exemptions granted and denied has varied from year to year. Consequently, agency decisions appear ad hoc, resulting in market uncertainty. This can harm small refineries and renewable fuel producers by undermining their ability to plan for infrastructure upgrades and renewable fuel demand.

GAO states that EPA has routinely missed the 90-day statutory deadline for issuing exemption decisions and does not have procedures to ensure that it meets these deadlines. In five of the nine years GAO analyzed, EPA took more than 200 days to issue a decision for more than half of the petitions submitted. According to GAO, these late decisions diminish the benefit of exemptions, create market uncertainty, discourage investment, and undermine the design of the RFS more broadly.
 
GAO made seven recommendations, including that EPA reassess its conclusion that all small refineries recover their RFS compliance costs in the price of the gasoline and diesel they sell; that DOE and EPA develop documented policies and procedures for making small refinery exemption decisions; and that EPA develop procedures to ensure that it meets deadlines. DOE agreed with GAO’s recommendations. EPA disagreed with one recommendation and partially agreed with the others. GAO “maintains that the recommendations are valid.”

Tags: RFS, Biofuel, DOE

 

By Lynn L. Bergeson and Carla N. Hutton
 
The U.S. Environmental Protection Agency (EPA) published a final rule on September 2, 2022, establishing an optional alternative renewable identification number (RIN) retirement schedule for small refineries under the Renewable Fuel Standard (RFS) program for the 2020 compliance year. 87 Fed. Reg. 54158. Small refineries that elect to use the alternative RIN retirement schedule will have to comply fully with their 2020 RFS obligations, including any RIN deficits from 2019 carried forward into the 2020 compliance year, by February 1, 2024. According to the final rule, the goal of the alternative RIN retirement schedule is to support small refineries in their transition into positions where they will be able to comply with their renewable volume obligations (RVO) on an ongoing basis. EPA notes that this will also ensure the use of renewable fuels in the United States as required by the RFS program and help provide certainty in the RFS program and fuels markets, given the “unique circumstances” as a result of its June 2022 actions, denying 60 small refinery exemption (SRE) petitions for the 2016-2021 compliance years that were still pending. The final rule was effective on September 2, 2022.

Tags: RIN, RFS, Biofuel

 

By Lynn L. Bergeson and Ligia Duarte Botelho, M.A.

On April 18, 2022, EPA announced the opportunity for public comment on its proposed analysis of the lifecycle greenhouse gas (GHG) emissions associated with biofuels produced from canola/rapeseed oil. EPA’s assessment considers diesel, jet fuel, heating oil, naphtha, and liquefied petroleum gas (LPG) produced from canola/rapeseed oil through a hydrotreating process. EPA is proposing to find that these pathways would meet the lifecycle GHG emissions reduction threshold of 50 percent required for advanced biofuels and biomass-based diesel under the Renewable Fuel Standard (RFS) program. Based on its analyses, EPA is also proposing to approve these fuel pathways, making them eligible to generate Renewable Identification Numbers (RIN) if they meet the definitional and RIN generation criteria for renewable fuel specified in the RFS regulations.

Comments must be submitted by May 18, 2022.

Tags: EPA, GHG, Biofuel, RFS, RIN

 

By Lynn L. Bergeson and Ligia Duarte Botelho, M.A.

On March 10, 2022, EPA issued a notice of disclosure to all obligated parties under the Renewable Fuel Standard (RFS) program that have petitioned for a small refinery exemption (SRE) or that have submitted certain RFS compliance reports. EPA will disclose information that is claimed to be, or has been determined to be confidential business information (CBI) from May 21, 2021, through December 31, 2023, to the Government Accountability Office (GAO). These records include:

  • All materials submitted by small refineries as part of petitions;
  • Any documentation that the Department of Energy (DOE) provided to EPA stating DOE’s petition findings and scores and any EPA responses thereto;
  • Any EPA record addressing the subject of the exemption petitions; and
  • EPA’s final exemption decisions sent to refineries.

GAO will destroy, delete, or return to EPA all CBI claimed documents at the conclusion of its review.

Tags: EPA, DOE, RFS, Biofuel

 

By Lynn L. Bergeson 

On January 31, 2022, U.S. Senators Amy Klobuchar (D-MN) and Chuck Grassley (R-IA) and 12 of their colleagues submitted a letter to EPA Administrator, Michael Regan, regarding EPA’s RFS Annual Rules and Proposed RFS Small Refinery Exemption Decision. In the bipartisan letter, Senators Klobuchar and Grassley and their colleagues urge EPA to prioritize the RFS in support of a “homegrown energy future” by:

  1. Maintaining the blending requirements for 2022, including the 250 million gallon remand;
  2. Denying all pending SRE;
  3. Eliminating the proposed retroactive cuts to the 2020 RVO; and
  4. Setting 2021 volumes at the statutory levels.

The letter commends EPA’s efforts to better the RFS program and highlights areas with room for improvement. Of particular concern to the letter signatories is EPA’s proposal to waive retroactively 2.96 billion gallons of renewable fuel from the 2020 RVOs. The letter states that adjusting these biofuel volumes more than two years after they were finalized would set a troubling precedent and impact negatively the entire agriculture and fuel supply chain. Therefore, Klobuchar and her colleagues urge EPA to eliminate the proposed retroactive cuts to the 2020 volumes and require obligated parties to comply with the 2020 standards that were issued in final in 2019. The signatories express similar concerns with the proposal to reset retroactively authority to establish 2021 RVOs and state that EPA cannot meet its ambitious climate goals without providing for growth and certainty in the RFS.

Senators Klobuchar and Grassley and their colleagues request that EPA finalize these actions as quickly as possible to restore integrity, stability, and growth to the RFS program and the U.S. biofuel sector.


 

By Lynn L. Bergeson 

On February 16, 2022, EPW held a hearing to examine EPA’s RFS program. U.S. Senator and EPW Chairman, Tom Carper (D-DE), made the opening statement, highlighting that EPW had not held an oversight hearing on the RFS since 2016. While Senator Carper demonstrated continued support for the RFS program, he also noted that “[f]or example, the amount of advanced renewable fuel used today in this country is far less than the 36 billion gallons that Congress mandated in 2007 be used by 2022. That shortfall is partly due to unforeseen market challenges and partly due to EPA’s delay in approving new fuels to enter the marketplace.” Senator Carper criticized the CAA for prohibiting some advanced biofuels that qualify for state programs from qualifying as renewable fuels under the RFS. He highlighted that volatility in compliance costs for refiners also presents challenges to implementing the RFS. The hearing included further discussions on other management and implementation challenges that EPA is facing and addressed opportunities to encourage increased deployment of more sustainable fuels.


 

By Lynn L. Bergeson 

On January 27, 2022, U.S. Senator Shelley Moore Capito (R-WV), Ranking Member of the Senate Environment and Public Works (EPW) Committee, and 14 of her colleagues submitted a letter to the U.S. Environmental Protection Agency (EPA) Administrator, Michael Regan, requesting that EPA reconsider its proposed actions under the Renewable Fuel Standard (RFS) program through the RFS Annual Rules and the Proposed RFS Small Refinery Exemption Decision. Senator Capito and her colleagues request specifically that EPA reassess its proposed denial of all pending small refinery exemption (SRE) petitions under the RFS program, because EPA’s decision breaches congressional intent under the Clean Air Act (CAA). According to the letter, Congress’ intent in amending the CAA to allow for SREs was to alleviate disproportionate economic hardship associated with RFS compliance for small refiners. Therefore, the denial of all pending SRE petitions contravenes Congress’ intent and, according to Senator Capito and her colleagues, will lead to increased litigation and uncertainty under the RFS program.

The letter also states that EPA’s “proposal for all-time high Renewable Volume Obligations (RVO) for 2022 does not reflect market realities and is likely to further raise costs for refiners – especially small and independent refiners – and therefore American consumers and the economy.” Senator Capito and her colleagues urge EPA to reconsider these actions to:

  • Provide relief and certainty for companies, employees, and communities across the United States;
  • Bolster access to affordable and domestically produced fuels for U.S. consumers; and
  • Remove obstacles for an economy that is challenged currently by inflation and supply chain difficulties.

 
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