Sparking Fears, EPA Claims Discretion To Set Post-2023 RFS Deadlines

Source: By Stuart Parker, InsideEPA • Posted: Monday, January 31, 2022

EPA’s just-finalized rule extending compliance deadlines for the renewable fuel standard (RFS) not only establishes flexible compliance dates dependent on when it sets biofuel blending volumes, but also claims discretion for the agency to set volumes when it pleases post-2023, inviting pushback not only from biofuels groups but also from refiners.

The rule, signed by Administrator Michael Regan Jan. 27, extends RFS compliance deadlines for refiners for the compliance years 2019, 2020 and 2021, a move the agency says is necessary because of the COVID-19 pandemic and ensuing long delay in finalizing volumes for 2021 and 2022.

EPA has proposed blending mandates for refiners for those years and is taking public comment on the volumes through Feb. 4.

EPA is also proposing to retroactively cut volumes for 2020 to reflect actual fuel consumption that year, which justifies extending the deadlines that refiners would otherwise have to meet without knowing their blending obligations, the agency says in the rule.

The new rule has yet to be published in the Federal Register, but it is “effective upon signature,” EPA says.

In addition to extending compliance, EPA in its response to comments on the proposed version of the rule says it believes there is no deadline for it to set RFS volumes for subsequent years after 2023, when the statutory blending targets expire

Currently, EPA must set volumes by Nov. 30 for the following year, but the agency has missed this target several times.

EPA’s stance exacerbates fears of biofuels groups that the agency will again delay issuance of blending volumes, and thereby push compliance deadlines into unknown territory, making the RFS unpredictable and investment decisions difficult.

Responding to biofuels groups’ criticism of its new automatic compliance extension mechanism, EPA says the method “will provide additional certainty to the implementation of the RFS program, not less. Doing so will obviate the need for EPA to engage in rulemaking processes such as this one to adjust compliance deadlines in the future.”

While the Clean Air Act “provides a November 30 deadline to establish RFS percentage standards for years prior to 2023, it does not prescribe or address compliance deadlines, nor a deadline to establish percentage standards for the 2023 standards and beyond. It is therefore neither arbitrary nor inconsistent with statutory obligations for EPA to set up this regulatory scheme.”

But a biofuels source says EPA is wrong, both on the law and its policy. “Contrary to what EPA seems to be saying, Congress did in fact give the agency a firm deadline for setting standards for 2023 and beyond. According to the statute, which is crystal clear, the Agency should have finalized the standards for 2023 and beyond no later than Oct. 31, 2021.”

EPA is developing the volumes for 2023 and beyond in a separate rulemaking known as the “set,” to be proposed later this year.

“Obviously, EPA missed that deadline badly and, at this point, is just trying to get the 2023 standards in place before the end of 2022. But for them to suggest that they have no legal deadline for setting RFS volume requirements after 2022 just isn’t right,” the source says.

“But even if there was ambiguity about EPA’s legal deadlines (there isn’t), common sense and the principles of good government should lead the agency to ensure that final volumes standards for 2023 and beyond are published well before those years begin.”

In a Jan. 28 research note, consulting group ClearView Energy Partners also has doubts about EPA’s long-term resolution of RFS implementation problems. “We would characterize the new approach as removing some uncertainty around the RFS by automatically making clear how deadlines adjust with delays in setting requirements. It does not appear to do anything to ensure that the EPA sets future requirements in a timely manner,” ClearView says.

‘Completely Contradictory’

In a Jan. 28 statement, Emily Skor, CEO of pro-ethanol group Growth Energy, says, “Delaying compliance deadlines is completely contradictory to efforts to lower rising gas prices and increase the use of cleaner, lower-carbon fuels. By continuing to delay compliance deadlines, EPA is creating uncertainty in the marketplace and stunting the blending of biofuel needed to decarbonize transportation as the Renewable Fuel Standard intended.”

And the Renewable Fuels Association said, “EPA just gave itself the power to perpetually delay implementation of yearly RFS blending requirements and continually kick the can down the road on compliance deadlines. This is not what Congress intended.”

Refiners have in general supported the extension of compliance deadlines, required not only because of uncertainty over final volumes but because of EPA’s failure to decide whether to issue small refinery economic hardship waivers, they say. However, EPA is now proposing to deny all 65 pending waiver requests.

But even oil sector groups have reservations about granting EPA excessive freedom to set volumes and therefore compliance dates.

In its response to comments, EPA cites the comments of the American Petroleum Institute (API), which say, “Moving forward, EPA should adhere to the statutory deadlines for RFS rulemakings and other RFS decisions. There is no reason at this point to adjust these filing deadlines for calendar years 2023 and beyond. If warranted, EPA can consider this issue again in the context of the forthcoming RFS Set rulemaking.”

In response, EPA says, “it is important to provide regulatory certainty to all parties as to how reporting deadlines may be adjusted in the future. Waiting until the RFS Set rulemaking to make this change is unnecessary and would provide no benefit. Additionally, we retain the authority to take a different approach to compliance deadlines in the RFS Set rulemaking.”

The American Fuel and Petrochemical Manufacturers (AFPM) supports compliance deadline extensions to specific dates, but also opposes the open-ended approach deadlines from 2023 and beyond adopted by EPA.

“Rather than establish floating deadlines that contemplate a failure to meet EPA’s statutory requirements, the Agency should commit to meeting its RFS obligations and propose case-by-case revisions to reporting requirements only if necessitated by the Agency’s inability to meet its obligations,” AFPM says. “AFPM is concerned by and does not support EPA’s repeated failure to respect the RFS statutory deadlines.”

And refiner Phillips 66 says, “we oppose this approach” for 2023 and beyond “and want to get back to issuing rules on time and reverting to the normal reporting deadlines.”

According to EPA’s new methodology, all compliance deadlines for obligated parties — refiners and importers of fuel – will be based on the effective date of annual volumes rules.

For example, if EPA makes its final volumes effective for 2021 on July 14, 2022, the deadlines would be as follows: for the 2019 compliance year, all obligated parties — March 31, 2020 (except small refineries); for small refineries for the 2019 compliance year – Sept. 1, 2022; for the 2020 compliance year, all obligated parties — Dec. 1, 2022; for the 2021 compliance year, all obligated parties — March 31, 2023; for the 2022 compliance year, all obligated parties — June 1, 2023.

For compliance year 2023 and beyond, EPA adopts a fixed formula as proposed, making the compliance deadline the latest date of the following: March 31 of the subsequent calendar year; the next quarterly reporting deadline after the effective date of the subsequent compliance year’s standards (typically 60 days after publication of the final rule in the Federal Register); or the next quarterly reporting deadline after the annual compliance reporting deadline for the prior compliance year.