EPA Readies New RFS Blending Mandates But Faces Significant Uncertainty

Source: By Inside EPA • Posted: Wednesday, September 8, 2021

EPA is moving closer to releasing its proposed renewable fuel standard (RFS) biofuel blending volumes for refiners in 2021 and 2022, following a long delay and amid serious uncertainty over the future direction of the program.

By law, EPA must issue final volumes rules by Nov. 30 for the following year, but EPA seems likely to miss this deadline for 2022 volumes and to miss it by more than a year for 2021 volumes.

The agency is widely expected to cut volumes for 2021 relative to 2020, citing reduced fuel demand due to the COVID-19 pandemic, but officials are expected to propose higher volumes again for 2022.

In addition to tough choices over the level of biofuel blending to require, EPA must consider its related policy on granting waivers to refiners on economic hardship grounds, and how to proceed in light of several court rulings on biofuels issues.

The RFS divides lawmakers of both parties along regional, rather than party lines, and efforts to bolster the program — or to curtail biofuels mandates — are also ramping up as the White House interagency review of 2021 and 2022 proposed volumes proceeds.

According to several reports, EPA is further considering retroactively reducing its RFS blending volumes for compliance year 2020, a policy supported by the refining sector but strongly opposed by biofuels producers, who say it is unlawful:

EPA Faces Legal, Political Doubts Over RFS Plan To Cut Biofuel Volumes
EPA is facing difficult legal and political questions over its plan, recently submitted to the White House for review, to reduce biofuel blending volumes required under the renewable fuel standard (RFS), especially its reported effort to reduce volumes not only for 2021 but also retroactively for 2020.

EPA is weighing whether to reconsider its 2020 RFS blending volumes in the light of recent court rulings, including a Supreme Court ruling this past summer allowing small refineries to continue receiving RFS compliance exemptions based on economic hardship, where those refineries have not held waivers in prior years. The high court ruling partially reversed a U.S. Court of Appeals for the 10th Circuit ruling against waiver issuance.

Any reconsideration of the 2020 rule could address whether the agency was correct to prospectively increase blending rates in anticipation of small refinery waivers it expected to issue. So far, EPA has not granted any such waivers for 2020, and the reconsideration could provide the pretext for cutting the 2020 volumes. Dozens of waiver requests remain undecided by EPA Administrator Michael Regan.

Meanwhile, EPA is seeking voluntary remand of dozens of waivers approved by the Trump EPA, affording it another chance to reevaluate its waiver policy. The agency has supported other findings weighing against waiver issuance by the 10th Circuit that the Supreme Court did not disturb, and several observers believe it may rely on these to block issuance of the many outstanding waiver requests:

EPA Seeks Remand Of Trump-Era RFS Waivers, Opening Door To New Policy
EPA is asking a federal appeals court to voluntarily remand Trump-era decisions that granted 31 small refinery waivers from renewable fuel standard (RFS) compliance and denied a smaller number of waiver requests, opening the door for the Biden administration to overhaul the agency’s waiver policies in light of recent court rulings.

EPA’s policy will also be conditioned on a recent ruling by the D.C. Circuit that dismissed biofuels producers’ challenge to EPA’s ability to issue RFS waivers “retroactively’:

Biofuels Group Suffers Blow In Ruling Over ‘Retroactive’ RFS Waivers
A coalition of biofuels producers seeking to challenge EPA’s issuance of “retroactive” small refinery waivers from renewable fuel standard (RFS) biofuel blending mandates has suffered a serious setback, after an appeals court in broader litigation over the RFS program rejected the group’s “broadside attack” on retroactive waivers.

Also, the agency must take endangered species issues into account when it sets the 2021 and 2022 blending volumes, after a D.C. Circuit ruling that largely upheld the volumes rule for 2019, but remanded the rule to EPA for its failure to adequately explain why formal consultation of other government agencies was not required under the Endangered Species Act (ESA).

Environmentalists argue that EPA must consult the Fish and Wildlife Service and National Marine Fisheries Service in every annual volumes rule, but the agency has never done so.

The ruling in Growth Energy, et al. v. EPA also rejected biofuels groups’ arguments that EPA cannot issue RFS waivers retroactively, and rejected biogas producers’ arguments that EPA has unlawfully failed to grant them RFS compliance credits for electricity used for transportation:

D.C. Circuit Largely Backs 2019 RFS, But Faults Lack Of ESA Consultation
A federal appellate court has largely upheld EPA’s renewable fuel standard (RFS) for 2019 but has remanded the rule over the agency’s failure to consult other agencies under the Endangered Species Act (ESA) as well as officials’ determination that the program does not cause “severe environmental harm.”

In addition to the Supreme Court’s ruling supporting continued issuance of small refinery waivers for refineries that lacked such exemptions in prior years, biofuels supporters have been rocked by the D.C. Circuit’s recent ruling striking down a Trump-era authorization of 15 percent ethanol fuel for summertime use. The ruling, if allowed to stand, could result in retailers being unable to sell E15 from June 1 through Sept. 15 each year, cutting off a valuable means for biofuels producers to increase their share of the fuels market.

Congressional champions of biofuels are now pressing to incorporate a number of their earlier efforts to neutralize the E15 ruling and to boost biofuels in general into Democrats’ sweeping package of measures now being considered under the budget reconciliation procedure:

Midwest Democrats Urge Leaders To Boost Biofuels In Reconciliation Bill
Midwestern Democrats in the House and Senate are calling on their party leaders to include a series of measures to boost the biofuels sector in their forthcoming multi trillion-dollar legislative package being crafted under streamlined budget reconciliation procedures, with some of the measures aiming to overcome recent EPA court losses.

Republicans opposed to the RFS are, meanwhile, pushing for EPA to issue waivers and cut biofuel blending dramatically, to compensate for economic losses in the refining industry they attribute to the program:

Oil-state Republicans urge EPA to waive 2020 RFS
A group of 17 Republican senators from oil-producing and refining states is pressing EPA to waive its renewable fuel standard (RFS) for 2020, and to reduce biofuel blending obligations for refineries in its forthcoming proposed volumes rules for 2021 and 2022, as the agency nears proposal of those rules.

Also, biofuels supporters see as a missed opportunity EPA’s recent proposal to increase the fuel economy of light-duty vehicles, citing ethanol as a means to increase octane in fuel, boost engine efficiency and cut greenhouse gas emissions.

With their pleas for EPA to consider ethanol as a near-term means to curb GHGs seemingly ignored in the context of the light-duty proposal, advocates are now turning their hopes to the promised second phase of vehicle GHG reductions for the long-term:

Biofuels Groups Eye Long-Term Vehicle GHG Rule As Venue For Sector
Biofuels groups are largely shifting their advocacy focus to future EPA rules, including its longer-term vehicle greenhouse gas standards, as they push ethanol and other biofuels as a low-carbon strategy, after the agency’s near-term auto GHG plan omitted discussion of biofuels as a potential compliance tool.