Biodiesel: EPA’s Chilling Signal Will Limit Growth – DTN

Overall biofuel volumes would remain virtually the same in 2020 as they were 2019 in EPA’s proposed Renewable Fuel Standard renewable volume obligations released on Friday.

One day after the Fourth of July holiday, biofuel industry groups were not in a festive mood in response to the proposal.

Overall, the agency proposes just a 120-million-gallon bump in overall volumes, leaving corn-based ethanol’s implied volume at 15 billion gallons and providing growth only in the cellulosic ethanol and advanced biofuels categories.

The proposal would set overall RFS volumes at 20.04 billion gallons in 2020. Cellulosic ethanol volumes would increase from 420 million gallons in 2019 to 540 million in 2020. The advanced biofuels category, which also includes biomass-based diesel, would grow from 4.92 billion gallons to 5.04 billion gallons — accounting for the growth in cellulosic ethanol.

Despite potential for far more growth in biodiesel, the EPA proposes leaving biomass-based diesel’s volume at 2.43 billion gallons in 2021, which is the same as 2020.

Kurt Kovarik, vice president of federal affairs for the National Biodiesel Board, said the proposal turns the “RFS program on its head.”

“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,” he said in a statement. “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. Worse, EPA refuses to reconcile its RFS rules with its small-refinery exemption handout spree.”

If history is an indicator of what final volumes may look like, the EPA likely will stay with its proposed volumes. Last year, biofuel groups called on the agency to account for billions of gallons lost to small-refinery waivers. The final numbers, however, changed very little.

WAIVER CONCERNS

Geoff Cooper, president and CEO of the Renewable Fuels Association, said the EPA continues to look the other way on concerns about waivers.

“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,'” he said.

“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,” Cooper said. “Congress gave EPA the direction and tools necessary to ensure that the statutory RFS volumes are enforced, and that includes prospectively reallocating exempted volumes to non-exempt parties. Instead, EPA has chosen to continue its demand destruction campaign that has been crippling to both ethanol producers and the farmers who supply our industry. Enough is enough.”

EPA approved 54 exemptions for 2016 and 2017, and 38 requests for 2018 exemptions are pending. The agency has not denied a single waiver request since 2015. So far, about 2.62 billion ethanol-equivalent gallons have been waived from the RFS.

The RFA said in a news release on Friday that the EPA continues to “flout” a federal court order requiring the agency to restore 500 million gallons of renewable volume obligations that a court ruled should not have been waived in 2016.

“EPA’s stubborn refusal to obey a court order to restore lost demand is yet another kick in the teeth to U.S. further demand destruction for renewable fuel producers and farmers already facing the worst market conditions in a generation,” Cooper said.

President Donald Trump ordered a review of the small-refinery waiver program, following a recent visit to Southwest Iowa Renewable Energy’s ethanol plant in Council Bluffs.

Iowa Renewable Fuels Association Executive Director Monte Shaw said the RFS continues to fall short in driving the ethanol market.

“The RFS was intended to send a clear market signal for the growth of biofuels and, unfortunately, this rule falls short,” he said. “Until the EPA reigns in the abuse of SREs and reallocates what has already been lost, billions of gallons of biofuel demand will be destroyed each year as SREs explode around our industry like fireworks above the Washington Monument on the Fourth of July.”

American Coalition for Ethanol CEO Brian Jennings said EPA continues to work contrary to Trump’s campaign promise on the RFS.

“EPA continues to disregard President Trump’s campaign promise that ‘the EPA should ensure that biofuel blend levels match the statutory level set by Congress under the RFS,'” Jennings said.

“Like the 2019 blending targets, the 2020 proposed RVOs reinforce our challenge to certain SREs in court and petition for EPA to account for lost volumes of renewable fuel resulting from the unprecedented number of retroactive SREs that continue to be granted by the agency. A strong rural economy depends upon growing the use of renewable fuels. We expect the administration to follow through on the promise that EPA and USDA will review the expanded use of refinery waivers and deliver a satisfactory remedy.”

Grant Kimberley, executive director of the Iowa Biodiesel Board and director of market development for the Iowa Soybean Association, said in a statement that EPA’s management of the RFS continues to hurt agriculture.

“The EPA has shown its intent to take the U.S. fuel supply backwards, caving into petroleum interests at the expense of biodiesel, an all-American fuel, and hurting our heartland’s farmers,” he said in a statement.

“Since this RFS proposal holds biodiesel volumes flat while doing nothing to account for the high number of so-called small-refinery exemptions, EPA effectively intends to reduce market potential for biodiesel and renewable diesel compared to this year. This sends a shocking signal to our biodiesel producers that the administration wants to unravel the RFS. It also undermines one of our country’s best opportunities to grow a low-carbon fuel supply while supporting American manufacturing jobs, many located in small-town Iowa.”

Growth Energy CEO Emily Skor said the agency’s proposal continues to undermine Trump’s support of biofuels.

“It’s unconscionable that EPA continues to undermine the president’s commitment to a strong rural America,” she said in a statement.

“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.”

The EPA on Friday touted the agency’s recent string of successes in finishing new RFS volumes on time. Under the previous administration, the EPA struggled to finalize RFS volumes on time.

“Unlike the previous administration, we have consistently issued the annual renewable volume obligations rule on time, which is critically important to America’s farmers and all stakeholders impacted by the Renewable Fuel Standard program,” EPA Administrator Andrew Wheeler said in a news release.

“We are on track to meet the deadline on time for the third year in a row and continue to provide greater regulatory certainty to farmers and refiners across the country.”

Read EPA’s proposal here.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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