EPA Proposes 2019 RVOs; Fails to Address Volumes Lost by Small Refiner Exemptions
By Sampath Jayasinghe
Decision Innovation Solutions
http://www.decision-innovation.com/
July 2018
In June 2018, the Environmental Protection Agency (EPA) published its proposed rule for the 2019 renewable volume obligations (RVOs) for cellulosic biofuel, advanced biofuel, and total renewable fuel under the Renewable Fuel Standard (RFS). This also contained the EPA proposed rule for biomass-based diesel (BBD) volume standards for calendar year 2020. The EPA is required by law to issue a final rule setting the 2019 RVOs by November 30.
Table 1 summarizes the proposed volumetric requirement for cellulosic biofuel, advanced biofuel, and total renewable fuel for 2019, plus the proposal for BBD for 2020. The 2019 BBD volume requirement of 2.1 billion gallons was established in the 2018 final rule, released December 12, 2017. The 2019 conventional ethanol fuel volume is set at 15 billion gallons, which is equal to the statutory volume proposal in the original 2007 RFS. Total advanced biofuel volume is at 4.88 billion gallons, 0.6 billion gallons increase from the 2018 final rule volume of 4.29 billion gallons. The statutory volume requirement for total advanced biofuel in 2019 was 13 billion gallons, according to the 2007 RFS amended in March 2010.
Table 1: Renewable Fuel Volume Standards Proposed for 2019; Biomass-Based Diesel Volume for 20201
1 All values are ethanol-equivalent on an energy content basis, except Biomass-based diesel.
aEPA finalized volume requirements; bEPA proposed volume requirements; n/a = not available
The proposed total renewable fuel volume for 2019 is 19.88 billion gallons, compared to the final 2018 rule of 19.29 billion gallons, an increase of three percent. The total renewable fuel statutory volume requirement for 2019 was 28 billion gallons. This is a 29 percent reduction in the proposed volume of total renewable fuels in 2019, compared to the statutory volume set by RFS in 2010. The 2020 BBD volume requirement is proposed at 2.43 billion gallons, an increase of approximately 16 percent from the 2018 rule of 2.1 billion gallons.
EPA has the legal power to grant exemptions to small refineries for compliance with RFS. EPA’s small refinery hardship waiver program is designed to exempt smaller refineries from the blending obligations if they can demonstrate complying with the regulation would cause them financial stress and economic hardships. According to the RFS, a small refinery is demarcated as creating no more than an average of 75,000 barrels of crude oil per day.
A recent report authored by Erin Voegele from Ethanol Producer Magazine provides the number of refiners that received a refinery waiver in 2016 and 2017. In 2016, EPA granted 19 exemptions out of a total of 20 petitions received. The total exempted RVOs was 790 million renewable identification numbers (RINs). In 2017, EPA granted 29 exceptions from a total of 33 received petitions. The total exempted RVOs in 2017 was 1.46 billion RINs. EPA is yet to provide a full list of the refiners that received a refinery waiver in 2016 and 2017. An excellent economic analysis of volumes lost due to small refiner exemptions in 2016 and 2017 can be found in Coppess and Irwin (2018).
Conclusions
The current EPA’s proposed volume standards for 2019, and the biomass-based diesel volume for 2020 shown in Table 1 fails to accommodate for the renewable fuel blending volumes lost to small refiner exemptions in past years. EPA does not show any intention to reallocate lost RVOs in small refiner exemptions to non-exempt larger refineries to make up the difference. A recent news report shows the EPA abandoned a proposal that could have forced refiners to blend more biofuels to compensate for the lost volume in the small refinery hardship waiver program.
References
Coppess, J. and S. Irwin. “EPA 2019 RFS Proposed Rulemaking: What You See Is Not What You Get.” farmdoc daily (8): 128, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, July 12, 2018.
