Biofuels industry welcomes actions to deny SREs and asks EPA to reconsider retroactive changes on RFS levels.

Jacqui Fatka, Policy editor

February 8, 2022

5 Min Read
ethanol plant in corn fields
Jim Parkin iStock

Two key comment periods recently closed for the Environmental Protection Agency’s actions impacting the Renewable Fuel Standard which offered the opportunity for biofuel supports to encourage the agency to act in a way the maintains the integrity of the program created by Congress.  

Senators Chuck Grassley, R-Iowa, and Amy Klobuchar, D-Minn., led a bipartisan group of 12 senators and Rep. Angie Craig, D-Minn., led several co-chairs of the bipartisan Congressional Biofuels Caucus in urging the EPA to protect the integrity of the RFS by maintaining the blending requirements for 2022; denying all pending SREs; eliminating proposed retroactive cuts to the renewable volume obligations (RVOs); and setting 2021 RFS volumes at the statutory levels.

In early December, EPA published its proposal to set the 2022 RFS implied conventional renewable fuel requirement at the statutory volume of 15 billion gallons. The EPA proposal also sought to cut the 2021 conventional renewable fuel requirement to just 13.32 billion gallons and retroactively reduce the 2020 requirement—finalized in December 2019—by as much as 1.22 billion gallons.

The letter from Democrat representatives note that they are “concerned about the negative impact that elements of the proposed rulemaking would have on family farmers, biofuels producers and consumers in their districts.” They note they believe the proposed retroactive reductions in the previously finalized 2020 renewable volume obligations and the proposed 2021 lookback would “create market uncertainty moving forward.”

Renewable Fuels Association President and CEO Geoff Cooper wrote that the organization is “strongly supportive of the proposed volumes for 2022 for all categories of renewable fuel,” but note that ethanol producers are “very troubled by EPA’s questionable proposed use of its ‘reset’ authority to reopen the 2020 RVO.” According to Cooper, retroactively revising the 2020 RVO “…would set a dangerous precedent and contradict the agency’s long-held position that it does not have the authority to retroactively adjust RFS standards once finalized.”

RFA’s comments also express support for EPA’s proposal to restore 500 million gallons of illegally waived RFS requirements from the 2016 RVO, as ordered by the D.C. Circuit Court in the Americans for Clean Energy v. EPA case, calling EPA’s plan “reasonable and fair.”

The American Coalition for Ethanol suggested to EPA it revise the 2021 volumes to align more closely with actual consumption, setting a final volume for implied conventional biofuel of at least 14 billion gallons.

Without course corrections for the 2020 and 2021 compliance years, EPA may merely maintain a 2022 statutory volume of 15 billion gallons on paper. ACE CEO Brian Jennings wrote that if the proposed cuts for 2020 and 2021 are finalized it “…will mean refiners will have amassed a stockpile of carryover RINs with which to meet a 15-billion-gallon implied conventional biofuel volume for 2022 as opposed to blending physical gallons of E15 and higher ethanol blends.”

All SREs should be denied

Growth Energy and RFA also expressed strong support for EPA’s proposal to deny 65 pending small refinery exemption petitions, noting that such an action would “restore confidence” in the Renewable Fuel Standard program. EPA’s proposal also would ensure that, moving forward, the SRE program complies with the Tenth Circuit Court’s 2020 decision in Renewable Fuels Association v. EPA.

In the proposal, EPA presents a statutory interpretation of the SRE provisions of the Clean Air Act that would, upon application to 65 pending SRE petitions, lead EPA to deny all 65 petitions. The interpretation would lead EPA to conclude that none of the 65 pending SRE petitions meet the “disproportionate economic hardship” standard for SREs, for three reasons: (1) no refiner bears RFS compliance costs that are disproportionate relative to others’ costs; (2) obligated parties recover RFS compliance costs and thus they do not suffer economic hardship; and (3) because of (1) and (2), none of the 65 SRE petitioners bear disproportionate economic hardship. 

“A full sweep denial of the 65 SREs pending before EPA would provide the biofuels industry with certainty in the marketplace and encouragement that the loss of over 4 billion gallons of biofuel blending during years of SRE abuse will soon become a practice of the past,” says Growth Energy CEO Emily Skor. “We are glad to see this EPA recognize that SREs can be granted in a narrow set of circumstances caused only by the RFS. Finalizing this proposal would help get the RFS back on track and ensure greater compliance by refiners so more cleaner-burning biofuels are blended, just as Congress intended.” 

RFA also encourages EPA to deny 31 SREs granted by the previous administration for compliance year 2018. Those exemptions were inappropriately issued in 2019 and were recently remanded to EPA by the D.C. Circuit following a legal challenge led by RFA. 

Cooper notes that the congressional goals of enhanced energy security and greenhouse gas emissions reduction have been undermined over the past several years due to the massive increase in SREs: “America’s biofuel producers and farmers have been forced to pay the price—the uncertainty and market instability caused by the surge of exemptions have left them unable to fully benefit from a program intended to increase demand for their products.”

The Iowa Renewable Fuels Association and Iowa Corn Growers Association made comments to EPA which emphasized that denying unjustified SREs is “not only justified but is required by a fair and faithful execution of the RFS.” IRFA and ICGA stressed that the primary justification given by refiners for an exemption is the cost of RINs while it has been repeatedly proven that RIN prices do not negatively harm refiners.

The comments from Iowa biofuel stakeholders also suggested to EPA several steps that would increase the availability and thereby reduce the price of RINs, chief among them ensuring all parts of the country have access to lower volatility blendstock that would make it possible for retailers to sell E15 all year.

“By standardizing the volatility of gasoline blendstocks, EPA can eliminate current boutique fuels, unlock greater ethanol blending opportunities, improve air quality, and reduce GHG emissions – all while increasing the supply and lowering the price of RINs,” the groups said. “Allowing more consumers the option of E15 provides them with a higher octane, lower cost, lower emissions fuel while at the same time significantly improving RFS compliance options for obligated parties.”

 

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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