The Environmental Protection Agency hosted an annual hearing in Ypsilanti, Mich., on next year’s biofuel targets under the Renewable Fuel Standard (RFS). Many members of the biofuel industry pushed for higher levels and for the agency to correct demand lost from previous small refinery exemptions.

EPA released its proposed renewable volume obligations (RVOs) under the RFS on July 5, 2019. Under the proposal, conventional ethanol would hold steady at 15 billion gal., while advanced biofuels would see a slight uptick to 5.04 billion gal., including 540 million gal. of cellulosic biofuel. Biodiesel targets, which are set two years in advance, were proposed at 2.43 billion gal. for 2021.

In his testimony, Growth Energy vice president of regulatory affairs Chris Bliley noted the industry’s frustrations with EPA’s failure to correct its course on refinery exemptions through annual blending targets: “Once again, the proposal assumes that despite exempting at least 190 million gal. of biofuel every year since 2013, that there will be ZERO gallons exempted in 2020. If EPA is going to waive billions of gallons, it must properly account for those gallons in the RVO calculation so that demand loss is not borne by biofuel producers and America’s farmers.”

Related:Court action sought to force EPA to account for lost RFS demand

Biofuel industry members claim that these waivers have reduced RFS requirements by 2.61 billion gal. of ethanol equivalent, with 38 more exemptions pending.

“The proposed rule we are discussing today allows retroactive refinery exemptions to continue to destroy demand for renewable fuels. In addition, the proposal ignores the D.C. Circuit Court’s decision that EPA improperly waived 500 million gal. in 2016,” National Corn Growers Assn. board member and Ohio farmer John Linder said. “These volumes are meaningless amid EPA’s massive expansion of retroactive refinery waivers. Farmers have no confidence EPA will ensure these volumes are met – which the law requires – because EPA fails to account for projected waivers in this proposal.”

Scott Richman, chief economist of the Renewable Fuels Assn., said Congress gave EPA the direction and tools necessary to enforce the statutory RFS volumes. “That includes prospectively redistributing volumes from [small refinery exemptions] to non-exempt parties. It also includes complying with a court order to restore illegally waived volumes from 2016. We urge EPA to do both in the final rule,” he testified.

Billey added, “Ethanol plants have closed, employees have been laid off, trade has been cut, all on top of farmers’ crops being devastated – and EPA claims it is too difficult for refiners to blend 500 million gal. of biofuel as the law requires. What kind of signal does that send to farmers? What message does that send to companies seeking to invest in American biofuels? It speaks volumes.”

Related:EPA issued RFS exemptions against DOE advice

American Coalition for Ethanol (ACE) communications director Katie Fletcher testified, “EPA’s mismanagement of the RFS has placed an artificial lid on domestic ethanol demand, causing dozens of ethanol plants to consider slowing production or shutting down.” The national ethanol blend rate retreated from 10.13% in 2017 to 10.07% in 2018. “ACE members are convinced EPA refinery waivers contributed to these historic setbacks,” Fletcher said.

Cellulosic setback

The actions also threaten future development of next-generation fuels and the cellulosic market.

Shai Sahay, senior regulatory counsel for POET, said, “Over the course of 2019, cellulosic RIN [renewable identification number] values dropped approximately 50%. The decreased RIN values not only threaten investment in future cellulosic technologies but also undermine investments that companies like POET have already made. To stop this trend, EPA must revise its cellulosic assessment methodology for 2020 to account for much faster cellulosic growth than last year.”

Sahay noted that EPA’s 2020 RVO proposal, the continued issuance of illegal small refinery waivers and its insistence on unreasonably large RIN banks “will further depress RIN prices and undermine the RFS.”

Biodiesel demand

National Biodiesel Board (NBB) executives criticized EPA’s proposal for the 2020 RFS and the 2021 biomass-based diesel volumes. The executives emphasized that EPA is sending a negative signal to the biodiesel industry by proposing flat volumes and then rolling them back through retroactive small refinery exemptions.

According to University of Illinois professor Scott Irwin, the demand destruction for biodiesel and renewable diesel could reach 2.45 billion gal. over the next few years, causing a $7.7 billion economic loss for the biodiesel industry.

Doug Whitehead, chief operating officer of NBB, added, "As it finalizes the current rule, EPA has several options to ensure that the volumes it sets are reliable and will be met. First and foremost, the agency must only grant exemptions to small refineries that actually qualify. Second, EPA must account for the exemptions in the annual RVO formula. The agency does have authority to include volumes that it has exempted or plans to exempt."

The U.S. rendering industry and the California Advanced Biofuels Alliance (CABA) also called for higher RFS biodiesel levels. Rendered products are widely used in production of biomass-based diesel. Rendering provides approximately 30% of the feedstock used to create biodiesel and renewable diesel per year. Of that, 13% is rendered animal fat, and 16% is leftover used cooking oil from restaurants that is collected and recycled by renderers.

Doug Smith, assistant vice president of research and development and quality assurance for Baker Commodities Inc., a rendering company and biodiesel producer, testified on behalf of the National Renderers Assn. and CABA.

We urge EPA to increase the RFS for biomass-based diesel by 330 million gal. to 2.76 billion gal. in 2021,” Smith said. “Sufficient biofuel plant capacity and distribution infrastructure exists to meet this increased level. The rendering industry believes additional volumes of its feedstock will be available to contribute to a growing biomass-based diesel industry capable of achieving this higher RFS.”

Projected expansion in livestock and poultry production, combined with more restaurant dining and demand for precooked meals, is anticipated to result in renderers producing growing volumes of feedstock.

Americans consider roughly 50% of meat from livestock and poultry inedible. Rendering reclaims these leftovers by safely separating them into fats and proteins. The rendering process recycles unwanted food into ingredients for new products such as biodiesel and other items, making rendering a green and sustainable practice.