EPA’s 2020 Renewable Fuel Standard Adopts New Methodologies That Diverge from Prior Interpretations

Source: By King & Spaulding • Posted: Monday, January 6, 2020

On December 19, 2019, the Environmental Protection Agency (“EPA”) issued its final rule for renewable fuel volume requirements for 2020 under the Renewable Fuel Standard (“RFS”) program.[i] The rule establishes the amount of biofuel that must be blended into gasoline and diesel transportation fuel produced or imported in 2020. The final volumes included a 50 million gallon increase in cellulosic biofuel to 590 million gallons from the amount proposed in July.[ii]The final volume of conventional biofuel remained the same as the proposed amount, 15 billion gallons.

This final rule continues EPA’s practice of relying on the cellulosic waiver authority to reduce requirements lower than the statutory volumes. For 2020, the required volume is 9.91 billion gallons lower than the statutory annual volume.[iii]In recent years, the delta between the final required volumes and the statutory volumes has been increasing.[iv]

Importantly, the rule also announces changes to account for volumes that will be exempted under the small refinery exemption in 2020.[v] This is a departure from the agency’s prior approach. The changes to the formulas are EPA’s attempt to ensure that the required volumes are met even when small refiners are granted exemptions from their 2020 obligations, “provided EPA’s projection of the exempted volume is accurate.”[vi]

These projections are based on the annual average of exempted volumes recommended by the Department of Energy (“DOE”) for 2016–2018. As a result, EPA projects 4.24 billion gallons of gasoline and 3.02 billion gallons of diesel to be exempt, or the equivalent of 770 million Renewable Identification Numbers (“RINs”).

In addition to incorporating DOE’s recommendations for projections of exempted volumes, EPA stated it “intends to grant relief consistent with DOE’s recommendations where appropriate. This policy extends to DOE’s recommendations of partial (50%) relief: where appropriate, we intend to grant 50% relief where DOE recommends 50% relief.”[vii] EPA further noted that nothing in the statute prohibits EPA from issuing partial waivers when warranted and recognized this approach is a departure from prior interpretation.[viii] Whether this will result in more certainty in the actual supply of renewable fuels remains to be seen.

Lastly, the rule indicates that the volume requirements were set without an intent to draw down in the carryover RIN bank. However, EPA noted that they will monitor the levels of the carryover RIN bank and “may or may not take a similar approach in future years.”[ix]

[i] EPA, Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021 and Other Changes (Dec. 19, 2019), Pre-publication Final Rule available at https://www.epa.gov/sites/production/files/2019-12/documents/rfs-2020-rvo-frm-2019-12-19.pdf.

[ii] Id.; see Renewable Fuel Standard Program: Standards for 2020 and Biomass-Based Diesel Volume for 2021, Response to the Remand of the 2016 Standards, and Other Changes, 84 Fed. Reg. 36,762 (proposed July 29, 2019) (“Standards for 2020”).

[iii] See 42 U.S.C. § 7545(o)(2)(B).

[iv] The differences between the required volumes and statutory volumes in 2017, 2018, and 2019, respectively were: 4.72 billion gallons, 6.71 billion gallons, and 8.08 billion gallons. See id.; Renewable Fuel Standard Program: Standards for 2017 and Biomass-Based Diesel Volume for 2018, 81 Fed. Reg. 89,746 (Dec. 12, 2016); Renewable Fuel Standard Program: Standards for 2018 and Biomass-Based Diesel Volume for 2019, 82 Fed. Reg. 58,486 (Dec. 12, 2017) Renewable Fuel Standard Program: Standards for 2019 and Biomass-Based Diesel Volume for 2020, 83. Fed. Reg. 63,704 (Dec. 11, 2018).

[v] Standards for 2020, supra note 1, at 72–76.

[vi] Id. at 75.

[vii] Id. at 10.

[viii] Id. at 78.

[ix] Id. at 18.