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July 7, 2017
On July 5, the EPA released its long anticipated 2018 Renewable Volume Obligation (RVOs) proposal, the proposed amount of biofuels it will require to be blended into the U.S. fuel supply in 2018, as part of the Renewable Fuel Standard (RFS). The proposal is the first time that the EPA has chosen to lower total fuel volumes as compared to the previous year. Additionally, 2018 is the first year the EPA will trigger a potential administrative “reset” of the policy by lowering volumes.
Having been delayed for weeks, the 2018 RVO proposal is drawing mixed reaction from the biofuels industry. The proposal keeps conventional ethanol volumes stable (primarily corn ethanol), keeps biodiesel volumes the same for 2018 and 2019, and lowers the cellulosic biofuel category by 73 million gallons as compared to 2017.
EPA chose to reduce both the advanced biofuel and total renewable fuel volumes (80 million gallons total) by approximately the same amount they reduce cellulosic ethanol (73 million gallons). This is notable because EPA says it is attempting to control the amount of imports of ethanol and biodiesel, which primarily qualify for the advanced biofuels category. In past years, EPA allowed some of the advanced biofuels to “backfill for some of the shortfall in cellulosic biofuels,” according to the agency.
Additionally, in reducing statutory volumes by 20 percent in two consecutive years, EPA will consider a “reset” of volumes. According to the Clean Air Act, any RFS reset undertaken by the EPA would require a complete analysis of various factors including impacts of the statute on the environment, the transportation fuels market, prices of agriculture commodities, food prices, job creation and rural development.
Conventional Ethanol
Conventional ethanol (or first generation ethanol) levels were maintained at 15 billion gallons, their cap under the RFS. While corn growers and corn ethanol producers were pleased with the maintenance of 15 billion gallons – the cap for first generation ethanol – others reactions were more mixed. Senator Chuck Grassley (R-IA), commented that while he was “glad the EPA proposal holds steady the requirement of 15 billion gallons for conventional ethanol, the lack of any increase for biodiesel is a missed opportunity.”
Biomass-Based Diesel
Volumes for biomass-based diesel must be set 14 months in advance. The proposal maintains the 2.1 billion gallon volumes from 2018 into 2019. According to Anne Steckel of the National Biodiesel Board, “this proposal continues to underestimate the ability of the biomass-based diesel industry to meet the volume of the RFS program.” Monte Shaw of the Iowa Renewable Fuels Association also noted that Iowa’s biodiesel plants are currently running under capacity. NBB reports that they have 4.2 billion gallons of domestic registered production capacity.
Cellulosic Biofuels
In setting cellulosic volumes, EPA changed its methodology compared to the last three years. EPA states that its projections for production were too high in previous years. According to EPA Administrator Scott Pruitt, the proposed cellulosic volumes are “cognizant of the challenges that exist in bringing advanced biofuels into the marketplace.” Advanced biofuels stakeholder groups aren’t convinced. Brooke Coleman, executive director of the Advanced Biofuels Business Council, commented, “advanced and cellulosic biofuels are the future of the RFS.” At a recent EESI briefing, the American Biogas Council and the Coalition for Renewable Natural Gas discussed the huge quantities of wet wastes that among other things, can be utilized as cellulosic fuels under the RFS. Jeff Broin, CEO of POET, a producer of both conventional and cellulosic ethanol, stated that the proposal “will cool advances” in the cellulosic space. One of the purposes of the RFS was to spur innovation in technology and cellulosic feedstock usage.
Attempting to Control Imports
Ahead of the RVO release, there was some speculation that the Administration’s concern over foreign imports – primarily ethanol from Brazil and biodiesel from Argentina and Indonesia – were holding the proposal’s release back. In the RVO proposal, EPA reports that “46 million gallons of ethanol and 731 million gallons of advanced biodiesel and renewable diesel were imported into the United States.” Additionally, biodiesel imports have been growing steadily over the past few years. In lowering the biomass-based diesel volume, the agency said it is attempting to cut imports.
However, the RFS does not discriminate between imported or domestically produced fuel, and it is likely that imports will continue to be used under the RFS. Previously, EPA had considered the volume of imports as a factor in setting RFS fuel volumes. According to Steckel, “They can't block [imports] through this program. The imports will still come in ... because they're cheaper. That only makes my members’ ability to grow even smaller."
The EPA will accept comments on the proposal for 45-days after the proposal is published in the Federal Register. The administration has until November 30 to finalize the RVOs.
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