Friday U.S. Environmental Protection Agency (EPA) Administrator Andrew Wheeler issued a proposed rule under the Renewable Fuel Standards (RFS) program that would set the minimum amount of renewable fuels that must be supplied to the market in calendar year 2020, as well as the biomass-based diesel volume standard for calendar year 2021. 

The proposal would set required biofuel use at 20.04 billion gallons next year, a marginal increase over this year’s 19.92 billion gallons. The difference is almost entirely attributable to an expansion of cellulosic biofuel, from 420 million gallons to 540 million gallons. The rule maintains the current 15-million-gallon target for corn ethanol.

The cellulosic biofuel volume requirement of 0.54 billion ethanol-equivalent gallons for 2020 is based on EPA’s production projection which is 0.12 billion ethanol-equivalent gallons higher than the cellulosic biofuel volume finalized for 2019.

Those in the ethanol industry had hoped the new mandate would account for the 2.6-2.7 billion in loss demand experienced from small refinery waiver exemptions, however, EPA failed to offer the lifeline to ethanol producers.

The EPA has handed out an unprecedented number of exemptions to small refineries across the country, resulting in the destruction of nearly 1 billion bushels of corn demand.

Related:Growth Energy sues EPA over small refinery exemptions

“We’re disappointed with the RVO targets proposed by the EPA. These numbers do not account for the billions of gallons of ethanol blending lost through the EPA’s expanded use of Small Refinery Exemptions. Barring a clear and meaningful reallocation of waived gallons, the RVO will not instill confidence in the US farming community during a year in which they’ve been hard hit with historically bad weather,” said Kyle Gilley, senior vice president of external affairs and communications at POET, the nation’s largest ethanol producer. “Forward progress is needed to offset the harm done by the unprecedented number of small refinery waivers issued last year and continue support for industry advancements, including cellulosic biofuels. We urge the EPA to reconsider these levels during the rulemaking process.” 

Emily Skor, Growth Energy chief executive officer, said, “The 2020 RVOs are a drop in the bucket compared to the demand lost due to a flood of refinery exemptions. Unless EPA restores demand destroyed through secret handouts to oil giants like Exxon and Chevron, these targets offer nothing but another year of lost opportunity and rural hardship.”

Geoff Cooper, president of the Renewable Fuels Assn. (RFA), said, “As long as EPA continues to dole out compliance exemptions to oil refiners without reallocating the lost volume, the agency may as well start referring to the annual RFS levels as ‘renewable volume suggestions’ rather than ‘renewable volume obligations. It is a complete misnomer to call these blending volumes ‘obligations’ when EPA’s small refinery bailouts have essentially transformed the RFS into a voluntary program for nearly one-third of the nation’s oil refineries.”

Related:Ethanol outlook weak amid sluggish demand

“We are frustrated the EPA did not account for potential waived gallons going forward in the proposed rule. If the EPA continues to grant retroactive waivers, the RVO numbers are meaningless and the EPA is not following the law. Farmers are facing a very tough economic environment and the continued waiver abuse chips away at farmers’ bottom line,” added Lynn Chrisp, president of the National Corn Growers Assn. (NCGA).

Biodiesel demand

Kurt Kovarik, National Biodiesel Board vice president of federal affairs, EPA's proposed rule would turn the RFS program on its head and fails to incentivize additional renewable fuel usage. EPA is proposing to maintain the biomass-based diesel (BBD) volume for 2021 at 2.43 billion gallons.

“The proposal sends a chilling signal to America's biodiesel and renewable diesel producers of EPA's intent to limit market growth for cleaner fuels. EPA appears to have simply repeated the previous biomass-based diesel volume of 2.43 billion gallons for 2021 without analyzing our industry's ability to achieve higher volumes," Kovarik continued.

EPA's calculation of the 2020 annual percentage standards uses 0 as the number of gallons of diesel and gasoline produced by exempt small refineries. For 2015, 2016 and 2017, EPA exempted nearly 28 billion gallons of gasoline and diesel produced by small refineries, without accounting for them in the RFS program. Those exemptions reduced demand for biodiesel and renewable diesel by hundreds of millions of gallons.

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