Leaked RFS Blending Volumes Point Toward Major Blow For Biofuel Sector

Source: By Stuart Parker, InsideEPA • Posted: Thursday, September 23, 2021

Biofuels groups are bracing for bad news after a leaked document purporting to show EPA’s proposed renewable fuel standard (RFS) blending volumes for 2020, 2021 and 2022 indicated significant cuts to volumes, below even those earlier anticipated, marking a possible victory for refiners, and a serious setback for biofuels producers.

Under the RFS, established under the Clean Air Act, refiners and importers of fuel must blend increasing volumes of biofuel into the fuel supply each year.

However, responding to the reduction in overall fuel demand spurred by the COVID-19 pandemic, EPA has been expected by many observers to reduce blending volumes using its waiver authorities.

According to the document seen by Inside EPA, Reuters and other news outlets, the “implied” conventional corn ethanol blending volume would be lower than some had anticipated. There is no explicit corn ethanol volume, but the bulk of the overarching total renewable fuel requirement is still satisfied by corn ethanol, at an implied 15 billion gallons (bn gal).

The document cites “conventional renewable fuel” at 12.5 bn gal for 2020 — a retroactive cut from the final 2020 level of 15 bn gal — and the proposed 2021 volume at 13.453 bn gal, with the 2022 level at 14.096 bn gal, of which 13.788 bn gal would be ethanol, and the remainder renewable diesel.

The overall total renewable fuel volume would be set at 17.129 bn gal in 2020, 18.628 bn gal in 2021 and 20.765 bn gal in 2022. This compares to a current 2020 total volume of 20.09 bn gal, marking a steep retroactive cut.

Advanced biofuel, which must achieve a greater greenhouse gas reduction than corn ethanol, would be set at 4.63 bn gal, a reduction from the final 2020 volume of 5.09 bn gal, rising to 5.175 bn gal in 2021 and 5.765 bn gal in 2022.

Cellulosic biofuel, also required to achieve a much greater GHG cut than corn ethanol, would be set at 0.505 bn gal in 2020, down from 0.590 bn gal in the final volume for 2020. In 2021, this would rise to 0.621 bn gal, then 0.765 bn gal in 2022.

So far, EPA has not confirmed the leaked numbers. An agency spokesperson did not respond to a request for comment by press time.

EPA faces a statutory deadline of Nov. 30 to finalize the proposal for 2022, but it is likely to miss this target as the proposed rule remains under White House Office of Management and Budget (OMB) review and may yet change. EPA must take public comment on the proposal before finalizing it.

The proposed volumes for 2021 are already seriously overdue, having missed a Nov. 30, 2020, deadline for finalization.

Geoff Cooper, president and CEO of the Renewable Fuels Association (RFA), said, “if the reported rumors about lowering the 2021 [renewable volumes obligations (RVO)] and retroactively cutting the 2020 RVO prove to be true, it could be absolutely devastating to our industry. At a time when ethanol producers are still recovering from the extraordinary market collapse related to COVID, our industry simply cannot afford to go through another turbulent cycle of EPA-induced demand destruction and RFS mismanagement.”

RFA earlier warned that “spoof” volumes numbers were being circulated to reporters. It is unclear whether the leaked volumes are therefore accurate.

But the proposals, if accurate, would be a boon for refiners seeking to reduce their RFS compliance costs. Merchant refiners that do not blend their own biofuels must purchase compliance credits, known as renewable identification numbers (RINs), from others in order to comply. Refining sector sources have recently warned that due to reduced fuel demand, the supply of available RINs could be exhausted within months, perhaps even forcing refiners to “ration” fuel. — Stuart Parker (sparker@iwpnews.com)