Biofuels deal promises minimum 15b RFS mandate

Rule-making expected out next week will solicit comments on how to account for lost ethanol blended volumes.

Jacqui Fatka, Policy editor

October 4, 2019

4 Min Read
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HIGHER ETHANOL BLENDS ENCOURAGED: New bills introduced by Sen. Amy Klobuchar, D-Minn., encourage availability and accessibility of higher biofuel blends.Photo courtesy of Growth Energy

After several years of lower-than-mandated levels being blended under the Renewable Fuel Standard (RFS), the Environmental Protection Agency promised Friday to ensure “more than 15 billion gallons” of biofuels be blended into the nation’s fuel supply. If realized, it would stop the bleeding in ethanol demand seen in recent years by the mounting number of small refinery exemptions (SREs) offered, which result in lower ethanol blending by retailers.

From 2016 through 2018, an estimated 4 billion gallons of ethanol demand were eliminated by allowing SREs to be granted and not otherwise obligate those lost volumes to remaining retailers. The proposal does not account for the waivers already granted but allows for a process in which future yearly establishments of the renewable volume obligations (RVO) may be picked up by other companies so the overall amount required under the RFS (15 billion gallons for corn-based ethanol) would not be reduced.

Estimated total fuel ethanol production for the 2018 marketing year appears to have been around 15.8 billion gallons. However, levels last year were over a billion gallons higher, as the U.S. exported 1.70 billion gallons of ethanol in 2018 — up 24% from 2017 and the highest annual volume on record. In 2019, ethanol exports have remained strong, but not enough to make up for the lost demand domestically for the blended levels, which have been closer to 13.5 billion gallons.

EPA said in a forthcoming supplemental notice building off the recently proposed 2020 renewable volume standards and the biomass-based diesel volume for 2021, EPA will propose and request public comment on expanding biofuel requirements beginning in 2020. An EPA official stated that this action will come "as soon as next week.”

Just the day before, members of the ethanol industry called for EPA to abide by the law – which is to require refiners to blend at least 15 billion gallons of biofuels into the domestic fuel supply.

EPA will seek comment on actions to ensure that more than 15 billion gallons of conventional ethanol are blended into the nation’s fuel supply beginning in 2020 and that the volume obligation for biomass-based diesel is met. This will include accounting for relief expected to be provided for small refineries.

An EPA official said the comments EPA receives will determine how to and at what levels SREs will be figured into the compliance year for 2020, set to come out by Nov. 30.

Building on the President’s earlier decision to allow year-round sales of E15, EPA also said it will initiate a rule-making process to streamline labeling and remove other barriers to the sale of E15. EPA additionally will continue to evaluate options for renewable identification market transparency and reform, which were offered earlier this year as part of the E15 announcements.

“Building on the success of the year-round E15 rule, this forward-looking agreement makes improvements to the RFS program that will better harness the production of our farmers and ensure America remains energy dominant,” U.S. Secretary of Agriculture Sonny Perdue said.

The U.S. Department of Agriculture said it will seek opportunities through the budget process to consider infrastructure projects to facilitate higher biofuel blends.

The Administration will continue to work to address ethanol and biodiesel trade issues, although the EPA official failed to offer any additional details on what this may entail but did say it would be included in the official rule-making when published in the Federal Register.

Renewable Fuels Association president and chief executive officer Geoff Cooper said it is important to remember that today’s announcement marks the beginning — not the end — of an EPA regulatory process. “Much work remains to be done. We will continue to diligently work with EPA and the Administration to ensure this action is finalized in a way that guarantees a 15 billion-gallon requirement in 2020 truly is a 15 billion-gallon requirement,” Cooper said in a statement.

The deal was praised by members on Capitol Hill who have been advocating on behalf of farmers.

“Our message was clear: uphold the RFS—15 billion means 15 billion. The president heard that message and has acted on it. The steps outlined today by the administration will help increase demand for our biofuels, provide certainty for farmers and producers for years to come, and ensure that EPA is implementing the RFS as it was written,” said Sen. Joni Ernst (R., Iowa).

Republican Nebraska Gov. Pet Ricketts noted, “Ensuring RVOs do not go below 15 billion gallons and expanding access to E15 will bolster the RFS and ethanol production at a critical time for our nation’s rural economy, which has been suffering from low commodity prices.”

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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